Investors are preparing for what appears to be on the horizon: Home Depot could experience its first annual sales decline since 2009.
Confirmation in Fiscal-Third-Quarter Report
With indications already evident in its fiscal-third-quarter earnings report from November, Home Depot’s path seems set. In response, Wall Street has adjusted its expectations for the home improvement giant’s upcoming earnings announcement set for Tuesday.
Analysts foresee a 3% decrease in revenue to $34.6 billion for Home Depot’s fiscal fourth quarter, as per FactSet estimates. The yearly revenue is also predicted to follow suit with a similar decline, according to the estimates.
Projections for Same-Store Sales and Adjusted Earnings
Projections for the quarter ending in January anticipate a 3.6% decrease in same-store sales. Adjusted earnings are estimated to come in at $2.77 per share for the period.
Challenges in the Home Improvement Retail Sector
The current landscape has been challenging for home improvement retailers, as rising mortgage rates discourage new home purchases and subsequent renovations. This trend has led to reduced sales figures for both Home Depot and its competitor Lowe’s.
Future Outlook and Market Response
Despite potential disappointing earnings, if Home Depot’s management team paints a rosier picture for fiscal 2024, the market might overlook the current underperformance. Following the third-quarter report, despite declining sales, an earnings beat and narrowed guidance helped bolster share prices.
Signs of Hope in Home Improvement Sector
As the busy season for home improvement approaches, there are signs that the sector may be looking up. Lower interest rates on the horizon and optimistic sentiments from analysts like D.A. Davidson’s Michael Baker and TD Cowen’s Max Rakhlenko suggest a positive outlook for companies like Home Depot.
Challenges Ahead
While there is some optimism, challenges remain. Sales at building material stores have seen a decline, foot traffic at Home Depot is down, and new-home construction took a hit in January.
Despite these obstacles, Home Depot’s shares have seen a modest increase this year, mirroring the overall gain of the S&P 500.