Home Depot’s 3Q EPS Jumps 26% On Home Improvement Boom; Street Bullish

Home Depot reported 3Q earnings of $3.18 per share, which increased 25.7% year-over-year and beat the Street’s estimates of $3.08, mainly benefiting from demand for home improvement products amid the coronavirus pandemic. The home improvement retailer’s 3Q revenues of $33.5 billion surpassed analysts’ expectations of $31.9 billion and marked a 23.2% year-over-year growth.

Home Depot’s (HD) top-line surged due to a 24.1% spike in comparable store sales. An increase in the number of transactions and in the average ticket price of 13% and 10%, respectively, also contributed to the growth.

Home Depot’s CEO Craig Menear said, “The third quarter was another exceptional quarter for The Home Depot as we saw the continuation of outsized demand for home improvement projects, which has led to sales growth of more than $15 billion through the first nine months of the year.”

Despite reporting solid 3Q results, shares fell 2.5% on Tuesday amid concerns related to incremental pressures around staff costs. Specifically, the company said it will spend an additional $1 billion on employees’ bonuses and compensation for its frontline workers. (See HD stock analysis on TipRanks)

Following the earnings release, Wells Fargo analyst Zachary Fadem reiterated a Buy rating on the stock and a price target of $310 (13.8% upside potential). In a note to investors, Fadem wrote, “HD delivered another historic print, as category demand remains robust, Pro business appears to be accelerating and HD is clearly taking share.” The analyst believes that “HD [is] a LT (long-term) winner with offensive/defensive characteristics, accelerating share gains, and ample financial flexibility.”

Overall, the Street has a bullish outlook on the stock. The Strong Buy analyst consensus is based on 14 Buys and 3 Holds. Given the year-to-date share price gain of 24.8%, the average price target stands at $313.88, implying further upside potential of about 15.2% to current levels.