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What's in the Cards for Home Depot (HD) in Q4 Earnings?

Zacks Equity Research

The Home Depot, Inc. HD is slated to report fourth-quarter fiscal 2017 results on Feb 20, before the opening bell. In the last quarter, the company delivered a positive earnings surprise of 1.7%.

Moreover, the company has a spectacular positive earnings surprise record for five years now. For the trailing four quarters, the company has delivered an average positive earnings surprise of 3.9%. Let’s see how things are shaping up prior to this announcement.

What to Expect?

The question lingering in investors’ minds now is whether Home Depot will be able to post positive earnings surprise in the quarter to be reported. The Zacks Consensus Estimate for the quarter under review is $1.62 per share, up 12.5% from the year-ago quarter. We note that the Zacks Consensus Estimate for the quarter has moved down in the last 30 days. Analysts polled by Zacks anticipate revenues of $23.7 billion, reflecting a year-over-year increase of 6.5%.

Home Depot, Inc. (The) Price and EPS Surprise

Home Depot, Inc. (The) Price and EPS Surprise | Home Depot, Inc. (The) Quote

Moreover, we note that the stock has outperformed the Retail-Wholesale sector in the last six months. The company’s shares have increased 22.3%, while the sector grew 16.9%. This solid growth comes on the back of a spectacular surprise history and growth strategies, including an interconnected strategy and a focus on Pro customers.



Factors at Play

Improving job scenario, housing market recovery, merchandising initiatives and post-hurricane activities, along with efforts to enhance omnichannel capabilities, have played an instrumental role in boosting Home Depot’s stock performance. Further, the company’s strong earnings trends and robust outlook bode well.

Home Depot has been reporting strong financial figures since 2008, with steady improvement in revenues and earnings per share. Notably, third-quarter fiscal 2017 marked the company’s fifth consecutive sales beat with earnings maintaining its five-year trend of positive surprises. Consequently, management raised its fiscal 2017 guidance.  The company anticipates earnings per share to be up nearly 14% to $7.36 in fiscal 2017, reflecting an increase from the previous guidance of 13% growth to $7.29.

Moreover, the company’s comparable store sales (comps) trend has been encouraging as it has surpassed the Zacks comps estimate for over two years now. In the most recent quarter, the company’s comps improved 7.9%, surpassing the Zacks estimate of 5.6%. Comps growth was aided by robust average ticket, which also topped the Zacks Consensus mark. For the fourth-quarter, the Zacks Consensus Estimate for an average ticket is pegged at 62.

Additionally, the company has been displaying solid growth across all regions, both in stores and online. Further, Pro category sales continue to outperform, driven by constant efforts to enrich customers’ experiences. Also, the company has been revamping itself by concentrating on square-footage growth and maximizing productivity from its existing store base. These iterations indicate that the company is poised for another solid quarter ahead.

What the Zacks Model Unveils?

Our proven model does not conclusively show that Home Depot is likely to beat earnings estimates this quarter. This is because, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Home Depot currently has an Earnings ESP of -2.36%. However, it carries a Zacks Rank #2. Though the company’s Zacks Rank #2 increases the predictive power of EPS, a negative Earnings ESP makes surprise prediction difficult.

Other Stocks With Favorable Combination

Here are some companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat:

Lowe’s Companies Inc. LOW has an Earnings ESP of +3.25% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aaron’s Inc. AAN has an Earnings ESP of +3.81% and a Zacks Rank #2.

Macy’s Inc. M has an Earnings ESP of +0.92% and a Zacks Rank #2.

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Home Depot, Inc. (The) (HD) : Free Stock Analysis Report
 
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