Shares of Home Depot Inc (NYSE: HD) are down nearly 4.0% on Tuesday even though the home improvement retailer reported better-than-expected earnings for its fiscal first quarter.
Home Depot stock down on a hit to revenue
The stock is also taking a hit this morning because the quarterly revenue came in well below Street estimates. Still, on CNBC’s “Squawk Box”, Oppenheimer’s Brian Nagel said:
A clear sales miss in the first quarter. Now, a lot of that seemed to be weather and lumber prices which are probably shorter term in nature. Nonetheless, they now have a more dampened view of 2023.
Other notable figures in the earnings release include customer transactions that were down 4.8% versus the previous year while average ticket per transaction edged up 0.2% only.
Home Depot stock is down more than 15% versus its year-to-date high at writing.
Is Home Depot stock worth buying?
Also a negative was the guidance that Home Depot slashed today that suggests softening consumer demand.
The multinational now expects up to a 13% hit to its per-share earnings this year on a 2.0% to 5.0% decline in sales – its first year-on-year decline in those metrics since fiscal 2009. According to the Oppenheimer analyst:
It’s a weak report. [But] this is happening against a very concerned backdrop towards consumer. As weather got more spring-like, you’ve seen sales pick up. So, I don’t think that’s going to be a big pause for the stock today.
Nagel currently has a price target of $400 on the Home Depot stock that signals a whopping 40% upside from here.
Notable figures in Home Depot Q1 earnings release
- Net income printed at $3.87 billion versus the year-ago $4.32 billion
- Per-share earnings also tanked significantly from $4.09 to $3.87
- Sales slipped 4.2% on a year-over-year basis to $37.26 billion
- FactSet consensus was $3.80 a share on $38.31 billion in revenue
- Comparable sales down 4.5% were way worse than Street estimates
Home Depot expects operating margin to sit between 14% and 14.3% in 2023. Nagel added:
EPS beat expectations that’s a testament to HD managing well in a softer sales environment. It’s an underlying positive. And we’ve actually seen better housing data lately.
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