Home Depot on Tuesday delivered better-than-feared quarterly results and appears to be on the verge of an earnings rebound heading into 2025. Net sales in the three months ended Oct. 27 rose 6.6% year over year to $40.2 billion, outpacing the $39.3 billion estimate, according to LSEG. Adjusted earnings per share (EPS) decreased 1.8% year over year to $3.78 per share, but exceeded expectations of $3.64 per share, LSEG data showed. Same store sales on a companywide basis were down 1.3%, while U.S. same store sales fell 1.2% versus the year ago period. Both results were better than expectations of declines of 3.1% and 2.9%, respectively. Shares of the retailer were flat in afternoon trading. HD YTD mountain Home Depot Year to Date Bottom line High interest rates and economic uncertainty still weigh on Home Depot. But same store sales — a key metric in the retail space that seeks to adjust sales results for new store opening or closings — while down from a year ago, did show improvement in the U.S and globally. The company raising its guidance is another reason to stay positive. As a result, this is likely the last down quarter from Home Depot, which is why we added to our position Tuesday. Patience is required as interest rates are key to increasing housing market turnover and catalyzing new building — and need to keep coming down. But as we enter 2025, we see a rebound and will look for more opportunities to build our position between now and then. We reiterate our 1 rating on Home Depot shares and increase our price target to $440 from $420. Quarterly results The company got a lift after the storms and hurricanes this summer. Comps in the U.S. were down 1.2% for the quarter, but the month-by-month data shows growth — down 3.5% in August, down 2% in September, and up 1.4% in October. “As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects,” said CEO Edward Decker. He added, however, “we continue to see pressure on larger remodeling projects driven by the higher interest rate environment and continued macroeconomic uncertainty.” The company did point to some “green shoots” for larger renovation projects, including the large amounts of home equity that can be tapped as the rates for home equity lines of credit come down. HELOC rates are falling as they track the shorter end of the yield curve where the Federal Reserve has more influence by cutting rates. Home Depot Why we own it: We added Home Depot to the portfolio ahead of the Federal Reserve’s first interest rate cut in September, betting that lowering borrowing costs will be on the horizon and spark a recovery in activity in the housing market. That, in turn, will help the retailer shake off a period of same-store sales declines. Competitors : Lowe’s Portfolio weighting: 2.0% Most recent buy: Nov. 12, 2024 Initiated : Sept. 9, 2024 Other highlights: Power outdoor garden building materials, indoor garden and paint departments all posted…
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