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The Home Depot Inc - Stock Quote HD

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Morningstar's The Home Depot Inc Stock Analysis

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Persistent Home Improvement Demand Supports Home Depot's Continued Top-Line Growth

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

After digesting wide-moat Home Depot’s first-quarter results, we plan to raise our $255 fair value estimate by a low-single-digit rate. In the quarter, Home Depot reached a zenith in sales (up 3.8% to $38 billion), helped by comparable average ticket growth of 11.4%, with 240 basis points from inflation, partially offset by transaction count, down 8%. The two-year stack comp growth of 33%—same as last quarter—indicates that healthy demand and backlog levels have yet to level off. Project backlogs are at all-time highs per the National Association of Home Builders, and Home Depot continues to benefit from housing dynamics like home price appreciation and a shortage in home inventory, despite rising mortgage rates. More importantly, customers are trading up to premium products, thanks to continued product innovation, further supporting top-line growth. While Home Depot continues to experience higher transportation costs, gross margin (30 basis points higher to 33.8%) and operating margin (60 basis points higher to 15.2%) exceeded our forecasts for 33.5% and 14.6%, respectively, resulting in $4.09 in diluted earnings per share for the quarter, ahead of our $3.78 estimate.

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The Home Depot Inc's Company Profile

Business Description

Home Depot is the world's largest home improvement specialty retailer, operating more than 2,300 warehouse-format stores offering more than 30,000 products in store and 1 million products online in the United States, Canada, and Mexico. Its stores offer numerous building materials, home improvement products, lawn and garden products, and decor products and provide various services, including home improvement installation services and tool and equipment rentals. The acquisition of distributor Interline Brands in 2015 allowed Home Depot to enter the maintenance, repair, and operations business, which has been expanded through the tie-up with HD Supply (2020). The addition of the Company Store brought textile exposure to Home Depot's lineup.

2455 Paces Ferry Road
Atlanta, GA, 30339
T +1 770 433-8211
Sector Consumer Cyclical
Industry Home Improvement Retail
Most Recent Earnings Apr 30, 2022
Fiscal Year End Jan 29, 2023
Stock Type Cyclical
Employees 490,600

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