The Home Depot, Inc. (NYSE: HD) Forecast, Historical Performance and Future Targets Ahead of Earnings

The Home Depot, Inc. (NYSE: HD is a well-known home improvement store that offers customers a vast choice of products ranging from building supplies, home improvement tools, outdoor supplies, and home decorations, lawns and garden supplies among others. Many Home Depot customers seeking services such as home installation and equipment rental are persuadable and can be found across the 2296 buildings and stores in the United States, Puerto Rico and the Virgin Island, Guan, besides Canada and Mexico. 

The company has two dominant categories of consumers, namely do it yourself (DIY) people who are homeowners in charge of numerous developments and installations and, professional peremptory (pros) such as independent developers and specialized technicians who require steady quality products from Home Depot to workWay.

Share Price and Performance

As of November 8th, The Home Depot’s stock closed at $405.90, reflecting a 1.62% increase. For the past one year this stock has been moving between $287.24 and a high of $421.56 showing the appreciable value addition. The m-cap of the company stands at about $403.2 billion while the P/E ratio is 27.24, satisfactorily supported by a beta of 1.01. 

This makes its earnings per share (EPS) for the previous twelve months (TTM) equal to 14.90; besides it indeed offers a forward annual dividend of $9.00 that makes its yield roughly 2.22%. Earnings report is due on November 12th 2024, and there is also a one-year target estimate set for $412.57

Analyst Expectations for Home Depot's Stock Ahead of Earnings

Ahead of the company’s earnings release this Tuesday morning on Nov 12th, 2024, analysts continue to predict higher revenues than the same period last year, although they expect profit to fall. The conservative outlook comes when Home Depot and other competitors such as Lowe’s had disappointing results from the prior quarters where essential expenditures overshadowed massive home improvement costs.

Analysts at JPMorgan noted that sales may receive a slight boost from hurricane activity affecting the southern U.S. during the quarter. However, any potential revenue bump could be partially offset by increased operational costs tied to storm-related damage recovery.

However, most of the analyst recommendations regarding Home Depot’s stock remain bullish. Among the 18 analysts covering the company in the Visible Alpha universe, 14 have given it a ‘buy’ and four have assigned it a ‘hold’. The average of all price targets $410.94 remains nearly 1% above Clements Friday closing price of $405.90.

The third quarter revenue forecast is $39.2 billion, which is 4% up from the prior-year level, while the net income is expected to be $3.6 billion, down 6% from the prior-year level.

Current Valuation Measures

Using Home Depot’s valuation ratios we get the company positioning in the context of home improvement retail industry. Therefore, in reference to the company enterprise value being $466.18 on November 8th, 2024 the figures clearly depict its high total value in case of including the two and excluding cash. 

The trailing P/E ratio of 27.28 and forward P/E ratio of, 25.84 show that the market has moderate growth expectation for the stock; however, the 5-year PEG ratio of 4.52 indicates that the anticipated growth rate of the company’s earnings is lower than that of the stock price. As for valuation coefficients, Home Depot’s price-to-sales is rather moderate 2.65, and the price-to-book is much higher 91.22 which indicates that the company can be estimated as significantly overbooked. 

Also, enterprise value to revenue ratio stands at 3.07 and enterprise value to EBITDA at 18.78 to express the overall profitability and cost structure effected through its assets and operations.

Financial Highlights: Profitability and Cash Flow

Home Depot's profitability metrics reflect its strong financial position, though they also underscore high leverage. The company's profit margin is 9.71%, showcasing its ability to generate significant earnings from its revenue base of $152.09 billion over the trailing twelve months. Return on assets (ROA) stands at 15.27%, while return on equity (ROE) is a substantial 513.36%, driven in part by its high debt levels. 

The company’s diluted earnings per share (EPS) is 14.90. However, the total debt-to-equity ratio is elevated at 1,479.82%, indicating a high reliance on debt financing. Despite this, Home Depot maintains a healthy levered free cash flow of $12.15 billion, providing solid liquidity and flexibility for ongoing operations and potential investment opportunities.

Comparison on Home Depot (HD) and S&P 500

Home Depot's stock has delivered strong returns over various timeframes, outpacing the S&P 500 in most categories.

• Year-to-Date (YTD) Return: HD achieved a 19.37% return, trailing the S&P 500’s 25.70%.

• 1-Year Return: HD fared even better with such a return of 41.28% while the S&P 500 had a 36.94% return.

• 3-Year Return: HD showed a return of 18.80% and this is below the S&P 500 of 27.63%.

• 5-Year Return: HD had a significant growth of 96.78% a shade better than S&P 500 growth of 94.33%.

It is seemingly evidenced by these numbers illustrating Home Depot’s ability and resiliency in this case measured over the period extending for five years with the company performing slightly better than market index.

However, short-term performance (YTD and 3-year) indicates some volatility, with HD underperforming the benchmark in the YTD and 3-year categories.

Earnings Per Share (EPS) Performance

Home Depot has consistently exceeded earnings expectations over the first three quarters of fiscal year 2024:

• Q1 2024: EPS beat estimates by $0.05.

• Q2 2024: EPS surpassed expectations by $0.03.

• Q3 2024: EPS outperformed projections by $0.11.

Operational brilliance and resilience amid the markets have been seen through the company’s capacity to meet or exceed EPS estimates for the current year’s first three quarters. Home Depot has maintained these same numbers for the past few consecutive quarters and investors will be waiting to see whether it will do the same in its Q4 2024 report which is due on the 12th of November.

Technical Analysis

Home Depot’s stock is showing a bullish outlook in its weekly chart. This is evident from its recent technical support around the $390 level. After reaching an all-time high of $421 in October, HD has rebounded from its support level and is still bullish, signaling potential for further growth. 

Analysts reinforce this optimism, with a one-year target estimate of $412.57. This suggests that HD may approach or surpass its recent high. This uptrend highlights investor confidence in Home Depot’s performance and its potential to maintain a strong position in the market.

Home Depot (HD) Price Prediction

Conclusion

Home Depot has demonstrated solid financial performance, supported by consistent earnings beats and strong returns over the past five years. Despite challenges, such as shifts in consumer spending and operational costs due to severe weather, the company has maintained a stable market position, attracting both DIY and professional customers. Technical analysis points to a bullish outlook, with HD stock trading near all-time highs and analysts maintaining a "buy" rating with modest upside potential. 

Looking ahead, Home Depot's valuation metrics, profitability, and cash flow position it well for sustained growth, while potential earnings growth could further boost investor confidence. With a strong foundation in the home improvement sector, Home Depot remains a valuable option for long-term investors.