The Home Depot Beats Estimates in Q2; Stock Down 3.6%

Home improvement retailer The Home Depot (HD) has delivered better-than-expected results for the second quarter of fiscal 2021 driven by revenue growth. Despite the outperformance, shares of the company fell 3.6% in Tuesday’s pre-market session, as it reported a 5.8% year-over-year fall in customer transactions.

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The company posted net earnings per share (EPS) of $4.53 during the quarter, which surpassed analysts’ expectations of $4.39 per share. Also, it increased 12.7% from the same quarter last year.

Revenue increased 8.1% year-on-year to $41.1 billion, topping analysts’ estimates of $40.4 billion. Comparable sales were up 4.5% and comparable sales in the U.S. surged 3.4%. Though customer transactions declined in Q2, the average purchase ticket size increased 11.3% to $82.48 from $74.12 in the year-ago period.

The Home Depot ended the second quarter with 2,298 retail stores spread across the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico. (See Home Depot stock charts on TipRanks)

The Chairman and CEO of The Home Depot, Craig Menear, said, “I am very proud of our associates, who continue to demonstrate a relentless focus on serving our customers. As a result of their efforts, we achieved a milestone of over $40 billion in quarterly sales for the first time in Company history.”

Following the earnings release, Wells Fargo analyst Zachary Fadem maintained a Buy rating on the stock with a price target of $360 (upside potential of 7.5%).

Fadem said, “In our view, HD’s Q2 results validate the view that underlying tailwinds remain intact.”

“HD’s results demonstrate it is more than a temporary COVID winner as it continues to benefit from favorable category trends (housing turnover, repair/remodel activity, etc.) and structural tailwinds (de-urbanization, millennial household formation, etc.),” he added.

Overall, the Street has a Moderate Buy consensus rating based on 11 Buys and 4 Holds. The average The Home Depot price target of $351.38 implies about 4.9% upside potential from current levels.

Furthermore, The Home Depot scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.