Home Depot (NYSE:HD) will report its first quarter financial results on Tuesday, May 16. While the home improvement retailer has benefitted from favorable business trends in the past several years, the moderation in demand could weigh on its financials in Q1 and 2023.
Home Depot’s comparable sales could remain muted as transactions normalize amid the shift in consumer spending towards services from goods.
During the Q4 conference call, the company’s CFO, Richard McPhail, highlighted that transactions have gradually moderated over the past several quarters, reflecting a shift in consumer spending. Given the shift, McPhail expects the home improvement market to witness a decline in 2023.
Given the expected softness, analysts expect Home Depot to report revenues of $38.34 billion, reflecting a slight decline from $38.9 billion in the first quarter of 2022.
The softening sales, high product costs, and pressure from shrinkage could weigh on Home Depot’s earnings. Analysts expect Home Depot to report earnings of $3.81 per share in Q1, compared to $4.09 in Q1 of 2022.
While analysts expect Home Depot’s earnings to decline, it’s worth mentioning that the company has consistently exceeded analysts’ estimates in the past several quarters.
Ahead of the Q1 print, Robert W. Baird analyst Peter Benedict lowered his price target on Home Depot stock to $320 from $340. In a note to investors dated May 12, the analyst said that he expects sequential deceleration in demand to weigh on Home Depot’s first-quarter financials. However, Benedict remains bullish about Home Depot’s long-term potential and reiterates a Buy.
Is Home Depot Stock a Buy, Sell, or Hold?
Analysts are cautiously optimistic about Home Depot stock ahead of Q1 earnings. It has received 14 Buy and nine Hold recommendations for a Moderate Buy consensus rating. Meanwhile, analysts’ average price target of $333.42 implies 14.79%.
