The Home Depot Inc. HD has reported third-quarter fiscal 2024 results, wherein earnings and sales surpassed the Zacks Consensus Estimate. Meanwhile, the company’s top line improved year over year in the third quarter of fiscal 2024, while earnings per share declined year over year.
Home Depot's adjusted earnings of $3.78 per share declined 1.8% from $3.85 in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate of $3.65.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Net sales advanced 6.6% to $40.2 billion from $37.7 billion in the year-ago quarter. Also, sales surpassed the Zacks Consensus Estimate of $39.33 billion. The company’s sales included contributions from the recently completed acquisition of SRS Distribution Inc.
Shares of Home Depot rose 1.4% in the pre-market trading session on Nov. 12 due to HD’s robust third-quarter performance and raised view for fiscal 2024. The Zacks Rank #2 (Buy) company’s shares have rallied 16.6% in the past three months compared with the industry's rise of 16.4%.
Zacks Investment Research
Image Source: Zacks Investment Research
HD is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best inter-connected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this space.
Detailed Picture of HD’s Q3 Results
Home Depot's comparable sales fell 1.3% in the reported quarter. The company’s comparable sales in the United States declined 1.2% in the fiscal third quarter. The decline resulted from decreases in customer transactions and the average ticket. In the fiscal third quarter, customer transactions moved down 0.2% year over year, whereas the average ticket was down 0.8%. Sales per retail square foot fell 2.1% in the reported quarter.
In dollar terms, the gross profit rose 5.4% year over year to $13.4 billion in the fiscal third quarter. However, the gross margin of 33.4% expanded 40 basis points (bps) year over year in the reported quarter. Our model predicted a 20-bps year-over-year decline in the gross margin to 33.6% for the fiscal third quarter.
SG&A expenses of $7.2 billion increased 8.5% from $6.6 billion in the year-ago quarter. SG&A expenses, as a percentage of sales, grew 30 bps year over year to 17.9%.
The adjusted operating income rose 1.9% year over year to $5.6 billion, while the adjusted operating margin of 13.8% contracted 70 bps year over year. The decline in the operating margin mainly resulted from higher SG&A expenses as a percentage of sales.
Our model predicted the SG&A expense rate to increase 60 bps year over year to 18.2%. Consequently, we anticipated the operating income to decline 2.9% year over year and the operating margin to contract 90 bps to 13.4% for the fiscal third quarter.
The Home Depot, Inc. Price, Consensus and EPS Surprise
The Home Depot, Inc. Price, Consensus and EPS Surprise
The Home Depot, Inc. price-consensus-eps-surprise-chart | The Home Depot, Inc. Quote
HD’s Other Financial Updates
Home Depot ended third-quarter fiscal 2024 with cash and cash equivalents of $1.5 billion, a long-term debt (excluding current installments) of $50.1 billion, and shareholders' equity of $5.8 billion. In the first nine months of fiscal 2024, the company generated $15.1 billion of net cash from operations.
What HD Plans for Fiscal 2024?
Management has raised its sales and earnings per share view for fiscal 2024, driven by the year-to-date performance and the inclusion of SRS results. The company notes that its fiscal 2024 will include an additional 53rd week. Home Depot anticipates sales to increase 4% year over year for fiscal 2024 compared with 2.5-3.5% growth expected earlier. The company’s sales guidance includes a $2.3-billion sales contribution from the 53rd week and $6.4 billion in incremental sales from SRS.
Home Depot expects comparable sales to decline 2.5% for the 52 weeks compared with the prior mentioned 3-4% decline. HD estimates the gross margin for fiscal 2024 to be 33.5%, with an operating margin of 13.5% (compared with the previously stated 13.5-13.6%). It expects an adjusted operating margin of 13.8%.
The company expects an effective tax rate of 24% for fiscal 2024. Net interest expenses are likely to be $2.1 billion for fiscal 2024 versus the $2.2 billion mentioned earlier. HD plans to open 12 stores for fiscal 2024.
Home Depot anticipates GAAP earnings per share to decline 2% year over year for fiscal 2024 compared with the prior stated 2-4% decline. HD expects adjusted earnings per share to fall 1% year over year versus the 1-3% decline mentioned earlier. The company anticipates the 53rd week to contribute 30 cents per share to earnings in fiscal 2024.
Other Stocks to Consider
Some other top-ranked stocks are Abercrombie & Fitch ANF, Deckers Outdoor DECK and Tecnoglass TGLS.
Abercrombie is a specialty retailer of premium, high-quality casual apparel for men, women and kids. It flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year earnings and sales indicates growth of 13% and 63.4%, respectively, from the previous year’s reported figures. ANF has a trailing four-quarter average earnings surprise of 28%.
Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. It currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Deckers’ current financial-year sales and earnings indicates growth of 13.7% and 12.1%, respectively, from the year-ago reported numbers. DECK has a trailing four-quarter earnings surprise of 41.1%, on average.
Tecnoglass is engaged in manufacturing and selling architectural glass and windows, and aluminum products for the residential and commercial construction industries. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. TGLS has a trailing four-quarter earnings surprise of 5.7%, on average.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
