What to expect from Home Depot shares after earnings?

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Home Depot (NYSE: HD) is expected to release its first quarter tax results on Tuesday, May 18. We expect the company’s earnings to likely be online as earnings exceed consensus estimates. The home improvement leader saw its revenue and net income increase to double digits as millions of homeowners found themselves spending significantly more time at home in 2020. The home improvement retailer has invested quickly and heavily to grow its digital capabilities in order to meet this demand. outbreak during the pandemic. In fact, these capabilities could attract customers even after the pandemic is over. Granted, sales won’t continue to grow at 20 +% levels like in 2020, but the company will likely continue to benefit from its ongoing One Home Depot.
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strategy and acquisition of HD Supply
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go forward. Our forecast shows The Home Depot valuation is $ 333 a share, which is slightly above the current market price of around $ 325. Watch our interactive dashboard analysis at Home Depot Pre-Earnings: What to expect in the first trimester? for more details.

(1) Revenue expected in line with consensus estimates

Trefis estimates Home Depot’s first quarter 2021 revenue to be around $ 34.7 billion, almost in line with the consensus estimate of $ 34.6 billion. The Home Depot achieved record sales growth in 2020 adding more than $ 21 billion year over year to its sales base and recording skyrocketing profits throughout the year. In addition, the company also recorded strong same-store sales growth of 19.7% in fiscal 2020. This compares to sales growth of only 3.5% in fiscal 2019. In In particular, the company saw a 10.5% increase in average comparable tickets and an 8.6% increase in comparable customer transactions in 2020, and we expect this trend to continue in the first quarter of the year as well. That said, the increase in remote working may be more sustainable, which will allow the company to serve customers looking to build and maintain a home office beyond the pandemic. Also, due to the pandemic, more people are deciding that owning a home is a better deal than renting an apartment – which means more business for home improvement retailers.

2) BPA will likely be ahead of consensus estimates

Home Depot’s first quarter 2021 earnings per share are expected to be $ 3.10 per Trefis analysis, 2% higher than the consensus estimate of $ 3.03. Despite substantial revenue growth, the company’s operating margin of 13.8% in 2020 was lower than 14.4% in the previous year, due to higher security, labor costs. work and supply chain related to Covid-19. However, the company’s operating profit grew 15% year-over-year during this period. Additionally, Home Depot generated net income of $ 12.8 billion in 2020, up from $ 11.2 billion in the period the previous year. It’s also worth noting that the retailer’s digital sales grew by around 86%, with customers picking up 62% of those in-store orders for the year. This indicates that the business is able to save significant costs associated with shipping items to the customer’s home during pickup orders, passing these savings on to their bottom line.

For the full year, we expect Home Depot’s net margin to increase by 50 basis points, from 9.7% in 2020 to 10.2% in 2021. This, coupled with growth of 3, Home Depot’s 5% year-on-year revenue could result in an increase of $ 1 billion year-on-year. net profit to $ 13.9 billion in 2021. All of this, which would translate into a possible increase in EPS from $ 11.92 in 2020 to about $ 12.89 in 2021.

(3) Estimate of the share price slightly higher than the current market price

According to Home Depot’s valuation, with an EPS estimate of about $ 12.89 and a P / E multiple of 25.8x in fiscal 2021, that translates to a price of 333, which is slightly ahead of the current market price.

For a more in-depth comparison between peer groups, it helps to see how they stack up against each other. Comparing HD stocks to peers shows how Home Depot stacks up against its peers on important metrics.

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