Home Depot Warns of Weak Consumer Demand Ahead: What to Know
Home Depot stock is choppy Tuesday as investors parse the retailer's Q2 earnings beat and downwardly revised comparable sales forecast.
![The outside of a Home Depot store in Washington DC](https://cdn.mos.cms.futurecdn.net/biz63amzLfVhoSZ5ptwJyW-415-80.jpg)
Home Depot (HD) stock is struggling for direction Tuesday after the home improvement retailer reported higher-than-expected results for its second quarter but warned of weaker consumer demand.
In the three months ended July 28, Home Depot's revenue increased 0.6% year-over-year to $43.2 billion, helped by its recent acquisition of SRS Distribution, which contributed $1.3 billion of revenue in the quarter. Its earnings per share (EPS) decreased by a penny from the year-ago period to $4.67.
Comparable sales for the quarter were down 3.3%, including a 3.6% drop in the United States.
![https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-200-80.png](https://cdn.mos.cms.futurecdn.net/hwgJ7osrMtUWhk5koeVme7-320-80.png)
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The underlying long-term fundamentals supporting home improvement demand are strong," said Home Depot CEO Ted Decker in a statement. "During the quarter, higher interest rates and greater macro-economic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects. However, the team continued to navigate this unique environment while executing at a high level."
Home Depot's headline results beat analysts' expectations. Wall Street was anticipating revenue of $43.1 billion and earnings of $4.49 per share, according to CNBC. However, the comparable sales result was far worse than the 2.1% decline analysts had forecasted.
As a result of its performance in the first half and its recently completed acquisition of SRS Distribution, Home Depot updated its full-year outlook, which includes a 53rd week. The company now anticipates revenue growth in the range of 2.5% to 3.5% and earnings per share to increase between 1% to 3%. This compares with its previous forecast for revenue and EPS growth of approximately 1% apiece.
Home Depot also revised its comparable sales outlook, now anticipating a decline of 3% to 4%. The company said a 3% decline "implies a consumer demand environment consistent with the first half of fiscal 2024" while a 4% decline "implies incremental pressure on consumer demand." The company had previously forecasted comparable sales to decline approximately 1%.
Is Home Depot stock a buy, sell or hold?
Home Depot has struggled on the price charts this year, up a slight 1% on a total return basis (price change plus dividends) vs the S&P 500's 13% return. Still, Wall Street is bullish on blue chip stock.
According to S&P Global Market Intelligence, the average analyst target price for HD stock is $383.08, representing implied upside of more than 10% to current levels. Meanwhile, the consensus recommendation is a Buy.
Financial services firm Jefferies is one of the more bullish outfits on the Dow Jones stock with a Buy rating and $426 price target.
"A noisy quarter given the six-week sales contribution from recently acquired SRS, but nonetheless, the underlying trend is clear: higher interest rates and greater macroeconomic uncertainty pressured weaker spend across home improvement projects during the quarter," Jefferies analyst Jonathan Matuszewski said in a note this morning.
Jefferies' $426 price target sits almost 23% above HD's current price.
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Tax Efficiency Mastery for Financial Success
As you build your wealth, tax considerations are going to become more important in protecting your earnings and staying in good standing with tax authorities.
By Justin Donald Published
-
IRS Has No Set Plan to Replace Old Tech
IRS What could old IRS technology mean for your federal tax return and cybersecurity?
By Kate Schubel Published
-
In Family Philanthropy, Embracing Differences Can Pay Off
Different approaches to charitable giving among generations and individuals can actually enhance the family's giving. Here's how.
By Julia Chu Published
-
Grow Your Investments Like Yale, Through a Self-Directed IRA
Yale's successful endowment focuses on alternatives. With a self-directed IRA, an individual investor could design a portfolio based on similar principles.
By Jason DeBono Published
-
Five Things About Annuities That May Surprise You
They're more varied, flexible and cost-effective than most people think, so don't let their complexity scare you off.
By Ken Nuss Published
-
Why a 15-Year Mortgage Could Be the Key to a Larger Nest Egg
Your mortgage payments would be higher, yes, but you'd save quite a lot on interest and be mortgage-free 15 years sooner, freeing assets for other investments.
By Dave Liniger Published
-
5 Stocks to Buy for a Trump Presidency
The race for the White House is heating up and these five stocks are set to benefit if Donald Trump claims victory.
By Will Ashworth Published
-
Six Target-Date Funds to Buy For Your Retirement
These six target-date funds are good set-it-and-forget-it options that are a staple of retirement plans.
By Nellie S. Huang Published
-
How to Deal With Inflation: Advice From a Financial Adviser
Higher prices are hitting everyone, but if you're especially hurting, here are some ways that could help you to cope.
By Kelsey M. Simasko, Esq. Published
-
Stock Market Today: Dow Dives 410 Points After August Jobs Miss
A big slump in tech stocks thanks to Broadcom's post-earnings slide put pressure on the main indexes too.
By Karee Venema Published