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Here's How Home Depot (HD) Stock Appears Going Into 2020

Zacks Equity Research

The Home Depot Inc. HD looks well-poised to enter the New Year, given its sound fundamentals and growth efforts. Notably, the Atlanta, GA-based company is benefiting from the smooth execution of its “One Home Depot” investment plan, focused on delivering an interconnected shopping experience to customers. The focus on Pro customers has been favoring the leading home improvement retailer.

This Zacks Rank #3 (Hold) stock has risen 28.7% so far this year, almost on par with the industry. However, the stock has comfortably outperformed the Retail-Wholesale sector’s rally of 24.6% and the S&P 500’s growth of 27.2%.


Additionally, the company’s long-term earnings growth rate of 11.2% reflects its inherent strength. Moreover, the Zacks Consensus Estimate for its fiscal 2020 top and bottom lines indicates improvements of 3.9% and 4.1%, respectively, from the year-ago reported figure.

Growth Endeavors

Home Depot is on track with the “One Home Depot” investment plan. It is benefiting from efforts to provide an interconnected shopping experience to customers, with localized and innovative products, and improved productivity. In-store investments under the plan mainly focus on easy customer navigation through stores and increased speed to checkout.

The introduction of way-finding signs and store refresh package along with front-end store investments to optimize labor and merchandise space productivity led to improved customer satisfaction scores and conversion rates in stores.

On the digital front, the company is investing in its website and other applications to further enhance online customer experience. It is witnessing higher traffic, better conversion and continued sales growth in the digital business through improved search capabilities, site functionality, category presentation and product content. Moreover, the company continues to roll out automated lockers in stores to make picking up online orders easier and convenient.

Home Depot is also making efforts to leverage the digital business to boost sales for adjacent categories like HD Home, Cool and Workwear. Apart from enhancing customer experience, these investments across digital and physical assets are likely to drive the company’s productivity growth.

Additionally, Home Depot’s Pro segment is a key growth driver, with Pro sales outpacing DIY (do-it-yourself) sales for the past several quarters. The Pro segment is benefiting from the company’s efforts to enhance service capabilities for the Pros. Home Depot is focused on simplifying the Pro shopping experience and expanding engagement through services like tool rental, delivery and the new B2B website.

The B2B platform provides a more personalized experience to Pro customers on customer feedback. Additionally, the company equipped store personnel with several tools to better understand Pro customers. The latest among these tools is the My View system, which enables associates to access customer data, allowing them to work proactively to better serve Pro customers.

The above-mentioned factors suggest that there are plenty of reasons to be optimistic about the stock going into 2020.

3 Hot Picks

Zumiez Inc ZUMZ has a long-term earnings growth rate of 12%. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Genesco Inc GCO, presently flaunting a Zacks Rank #1, has a long-term earnings growth rate of 5%.

Tilly's, Inc TLYS has a long-term earnings growth rate of 11%. It currently sports a Zacks Rank #1.

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