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Home Depot (HD) Outpaces Stock Market Gains: What You Should Know

Zacks Equity Research

Home Depot (HD) closed at $241.64 in the latest trading session, marking a +0.43% move from the prior day. This move outpaced the S&P 500's daily gain of 0.17%. At the same time, the Dow 0%, and the tech-heavy Nasdaq gained 0.11%.

Coming into today, shares of the home-improvement retailer had gained 7.73% in the past month. In that same time, the Retail-Wholesale sector gained 2.9%, while the S&P 500 gained 2.78%.

HD will be looking to display strength as it nears its next earnings release, which is expected to be February 25, 2020. The company is expected to report EPS of $2.10, down 6.67% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $25.76 billion, down 2.74% from the year-ago period.

It is also important to note the recent changes to analyst estimates for HD. These revisions help to show the ever-changing nature of 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 ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 0.07% higher. HD is currently sporting a Zacks Rank of #3 (Hold).

Digging into valuation, HD currently has a Forward P/E ratio of 22.92. Its industry sports an average Forward P/E of 14.27, so we one might conclude that HD is trading at a premium comparatively.

Investors should also note that HD has a PEG ratio of 2.04 right now. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Building Products - Retail was holding an average PEG ratio of 1.29 at yesterday's closing price.

The Building Products - Retail industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 89, which puts it in the top 35% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. 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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