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Home Depot (HD) Gains But Lags Market: What You Should Know

Zacks Equity Research
General Dynamics (GD) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

Home Depot (HD) closed the most recent trading day at $191.60, moving +0.66% from the previous trading session. This move lagged the S&P 500's daily gain of 0.8%. Meanwhile, the Dow gained 0.82%, and the Nasdaq, a tech-heavy index, added 1.14%.

Heading into today, shares of the home-improvement retailer had lost 7.09% over the past month, lagging the Retail-Wholesale sector's loss of 3.96% and the S&P 500's loss of 3.2% in that time.

Wall Street will be looking for positivity from HD as it approaches its next earnings report date. This is expected to be May 21, 2019. In that report, analysts expect HD to post earnings of $2.18 per share. This would mark year-over-year growth of 4.81%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $26.33 billion, up 5.54% from the year-ago period.

For the full year, our Zacks Consensus Estimates are projecting earnings of $10.08 per share and revenue of $111.32 billion, which would represent changes of +1.92% and +2.89%, respectively, from the prior year.

Any recent changes to analyst estimates for HD should also be noted by investors. Recent revisions tend to reflect the latest near-term business trends. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. The Zacks Consensus EPS estimate has moved 0.06% lower within the past month. HD currently has a Zacks Rank of #3 (Hold).

Investors should also note HD's current valuation metrics, including its Forward P/E ratio of 18.88. For comparison, its industry has an average Forward P/E of 13.47, which means HD is trading at a premium to the group.

It is also worth noting that HD currently has a PEG ratio of 1.65. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. HD's industry had an average PEG ratio of 1.22 as of yesterday's close.

The Building Products - Retail industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 76, which puts it in the top 30% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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