This morning, Home Depot (HD) reported its Q2-2022 earnings results. Both earnings per share (EPS) and revenue were company records and beat analysts’ estimates, while HD reaffirmed its outlook for the remainder of its fiscal year. As a result, shares are up over 3.6%, while the market is down slightly on the day.
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Here are some key highlights from Home Depot’s Q2-2022 earnings report:
- Diluted EPS of $5.05 grew 11.5% over the past year and beat estimates calling for $4.95 per share.
- Revenue of $43.8 billion increased 6.5% year-over-year, beating estimates by 1%.
- Total same-store sales grew 5.8% (analysts forecasted 4.9% growth), and same-store sales in the U.S. grew 5.4%.
Sales growth was driven by higher prices for its products, as the number of transactions at Home Depot stores actually fell 3%, while the average transaction cost increased by 9.1%. Another positive thing to note is that HD’s operating income growth of 8.6% outpaced revenue growth by 210 basis points, demonstrating operating leverage.
Regarding its Fiscal 2022 outlook, Home Depot expects revenue and same-store sales to grow by about 3% and diluted EPS to grow in the mid-single-digit range. The company also expects its operating margin to be 15.4%, in line with the margin it achieved in Fiscal 2021.
Home Depot Remains Strong Despite Waning Website Traffic
As mentioned earlier, the number of transactions at Home Depot stores fell 3% year-over-year. This could have been predicted with TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service. According to this data, Q2 website traffic fell 10.8% on a year-over-year basis.
However, Home Depot still managed to see solid sales growth. This highlights the importance of finding companies with strong pricing power that can pass on costs to consumers to offset other headwinds.
Is Home Depot Stock a Buy or a Sell?
Turning to Wall Street, Home Depot stock comes in as a Moderate Buy based on 16 Buys and six Holds assigned in the past three months. The average HD stock price target of $345.76 implies 6.8% upside potential.
Conclusion: Strong Results Make HD Stock Worth Considering
Home Depot had strong earnings that beat estimates, and it reaffirmed its guidance, easing investors’ common fears of negatively-revised outlooks. Because of this, the stock is up over 3.6% today, outperforming the overall U.S. market, which is currently in the red. While Home Depot’s price target doesn’t offer much upside potential, analysts are bullish, nonetheless. Due to its long-term consistency, strong brand power, and earnings power, Home Depot is a solid stock for investors to consider.
