Can Inflation & Supply Woes Mar Home Depot’s (HD) Q1 Earnings?

The Home Depot, Inc. HD is expected to register top and bottom-line declines when it reports first-quarter fiscal 2022 results on May 17, before market open. The Zacks Consensus Estimate for its fiscal first-quarter earnings of $3.65 per share suggests a decline of 5.4% from the year-ago period’s reported figure. The consensus estimate has moved down 0.5% in the past 30 days.

The consensus mark for quarterly revenues is pegged at $36.47 billion, indicating a decline of 2.7% from the figure reported in the year-ago quarter.

In the last reported quarter, the company delivered an earnings surprise of 0.3%. The leading home improvement retailer delivered an earnings surprise of 11.1% in the last four quarters, on average.

The Home Depot, Inc. Price and EPS Surprise

The Home Depot, Inc. Price and EPS Surprise

The Home Depot, Inc. price-eps-surprise | The Home Depot, Inc. Quote

Key Factors to Note

Home Depot is likely to have witnessed continued cost pressures in first-quarter fiscal 2022, driven by the impacts of inflation, supply-chain dynamics and the consumer spending environment. Higher transportation costs and product mix are expected to have resulted in a higher cost of goods sold in the fiscal first quarter, resulting in a lower gross margin. Further, the adverse product mix and investments in its supply chain are expected to have marred the gross margin in the to-be-reported quarter.

On its last reported quarter’s earnings call, management expected the uncertainties relating to the supply-chain issues, inflation and the overall consumer environment to persist throughout fiscal 2022. Consequently, the company provided a conservative stance on its fiscal 2022 projections. It anticipates lower-than-anticipated sales and earnings results for the fiscal first quarter.

However, HD is likely to have benefited from the continued demand for home improvement projects, a robust housing market and ongoing investments. The company is expected to have witnessed growth in the Pro and DIY customer categories, along with digital momentum in the fiscal first quarter.

Home Depot has been witnessing significant benefits from the execution of its “One Home Depot” plan, which focuses on expanding the supply chain, technology investments and digital enhancements. The company’s interconnected retail strategy and underlying technology infrastructure have been consistently boosting web traffic for the past few quarters. This is expected to have aided digital sales in the to-be-reported quarter.

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Zacks Model

Our proven model does not conclusively predict an earnings beat for Home Depot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Home Depot has a Zacks Rank #4 (Sell) and an Earnings ESP of -1.67%.

Stocks With Favorable Combination

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Costco Wholesale COST currently has an Earnings ESP of +1.09% and a Zacks Rank of 2. The company is likely to register an increase in the top line when it reports third-quarter fiscal 2022 numbers. The consensus mark for COST’s quarterly earnings has moved up by a penny in the past seven days to $3.04 per share. The consensus estimate suggests 9.8% growth from the year-ago quarter’s reported number.

Costco’s top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $51.8 billion, which suggests a rise of 14.3% from the figure reported in the prior-year quarter.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Ross Stores ROST currently has an Earnings ESP of +1.24% and a Zacks Rank of 2. The company is likely to register an increase in the top line when it reports first-quarter fiscal 2022 results. The consensus mark for ROST’s quarterly revenues is pegged at $4.5 billion, which suggests a rise of 0.5% from the figure reported in the prior-year quarter.

The Zacks Consensus Estimate for earnings has been unchanged at 99 cents per share in the past 30 days. However, the consensus estimate indicates a 26.1% decline from $1.34 reported in the year-ago quarter.

Designer Brands DBI currently has an Earnings ESP of +2.17% and a Zacks Rank of 3. The company is likely to register top and bottom-line growth when it reports first-quarter fiscal 2022 earnings. The consensus mark for DBI’s quarterly revenues is pegged at $806.7 million, which suggests 14.7% growth from the figure reported in the prior-year quarter.

The consensus mark for quarterly earnings has moved up by a penny in the past seven days to 23 cents per share. The consensus estimate for DBI suggests growth of 91.7% from the year-ago quarter.

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The Home Depot, Inc. (HD) : Free Stock Analysis Report

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