Prime Highlights:

• Home Depot’s stock rose 3% after the company reaffirmed its full-year forecast despite missing Wall Street’s earnings and revenue expectations.
• The retailer signaled momentum in its business with rising big-ticket sales, improved monthly comparable sales, and a 12% jump in online sales.

Key Facts:

• For the fiscal second quarter, Home Depot reported adjusted earnings of $4.68 per share versus the $4.71 expected, and revenue of $45.28 billion against $45.36 billion expected.
• Comparable sales increased 1% overall and 1.4% in the U.S., marking only the second quarter of year-over-year growth in nearly three years.

Key Background

Home Depot shares climbed 3% on Tuesday after the home improvement retailer reaffirmed its full-year outlook, even as it fell short of Wall Street’s earnings and revenue estimates for the fiscal second quarter.

The Atlanta-based company reported adjusted earnings of $4.68 per share, slightly below analyst expectations of $4.71, according to LSEG. Revenue came in at $45.28 billion, compared with $45.36 billion projected. Net income stood at $4.55 billion, or $4.58 per share, down marginally from $4.56 billion, or $4.60 per share, a year earlier.

Although the company has missed the estimate, Home Depot still maintained the previous forecast to increase total sales by 2.8 percent and an increase in comparable sales by 1 percent over the year. The quarter marked the company’s first since 2014 to fall short on both revenue and profit expectations.

CFO Richard McPhail acknowledged that homeowners remain cautious, citing a “deferral mindset” that began in mid-2023. Still, he pointed to signs of recovery, including rising demand for high-ticket purchases such as grills and steady improvement in monthly comparable sales, up 0.3% in May, 0.5% in June, and 3.3% in July. Transactions above $1,000 increased 2.6 percent compared with the previous year, and 12 out of 16 merchandising categories increased.

Online sales jumped 12% year-over-year, supported by faster delivery speeds. Comparable sales rose 1% overall and 1.4% in the U.S., marking only the second quarterly increase in nearly three years.

CEO Ted Decker noted that easing mortgage rates could further support home improvement activity, but emphasized that general economic uncertainty remains the top reason for deferred projects.

Home Depot continues to expand beyond do-it-yourself shoppers. Pros now account for 55% of sales following acquisitions of SRS Distribution for $18.25 billion and GMS, a building products distributor, for $4.3 billion, expected to close by January.

As of Monday’s, close, Home Depot stock was up 1.5% year-to-date, trailing the S&P 500’s nearly 10% gain. Shares ended the day at $394.70 following the earnings release.