Home Depot (HD) investors are optimistic that the chain is starting to turn things around.
The home improvement chain has struggled as shoppers held off on major renovation projects amid high interest rates and tighter wallets.
But Wall Street expects that the fourth quarter may be a slight improvement over previous ones. On Tuesday before market open, the company is estimated to post revenue of $39.11 billion and earnings per share of $3.30, both a bump over the prior year.
Same-store sales growth is expected to fall 1.71%, dragged down by lower foot traffic and ticket size. This would mark Home Depot's eighth straight quarter of negative same-store sales growth.
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In a note to clients, Telsey Advisory Group's Joe Feldman said he expects "soft" same-store sales growth in the quarter "given continued pressure on the consumer from high stacked inflation, elevated interest rates, and the ongoing shift toward services."
However, he "would not be surprised to see modest upside given generally solid retail sales across the industry."
The company could have seen incremental sales from "hurricanes and wildfires related demand," Wedbush analyst Seth Basham told clients in a note. A solid holiday season, stronger appliance sales, higher lumber prices, and "possibly better demand for bigger ticket projects" are also tailwinds.
Home Depot may also offset some softness with its Pro business and new store openings, per Basham.
"The performance of its recent SRS acquisition likely remains on track," he said. Home Depot completed the $18.25 billion acquisition of SRS Distribution, a distributor for residential professional customers, last June.
Here's what Wall Street expects Home Depot to report for its fourth quarter results, compared to the prior year:
Revenue: $39.11 billion, versus $34.79 billion
Adjusted earnings per share: $3.03, versus $2.82
Same-store sales growth: -1.71%, versus -3.50%
Foot traffic: -1.02%, versus -2.10%
Average ticket size: -0.35%, versus -1.30%
Here's what Wall Street expects Home Depot to report for its fiscal 2024 results, compared to the prior year:
Revenue: $158.8 billion, versus $152.67 billion
Adjusted earnings per share: $15.12, versus $15.11
Same-store sales growth: -2.29%, versus -3.20%
Foot traffic: -1.36%, versus -2.90%
Average ticket size: -1.20%, versus -0.30%
Tariffs will also be a top concern for Home Depot and rival Lowe's (LOW), which reports earnings on Wednesday. The Trump administration recently imposed a 10% additional tariff on Chinese imports and a 25% tariff on steel, while a 25% tariff on Canada and Mexico is on hold. Prospects of reciprocal tariffs on a slew of countries are also on the table.
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The tariffs could increase costs, while any price hikes on retailers' end may affect consumer demand.
"We source well more than half of our goods domestically and in North America, but there certainly will be an impact," CEO Ed Decker said in its third quarter earnings call.
"Given our scale, our experience going through the previous tariffs ... I'd bet on this team's ability to work with the type of suppliers we have to work through this in a differentiated manner than others in the industry."
Brooke DiPalma is a senior reporter for chof360 Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
