Home Depot Tops Estimates, Lifts Sales Outlook

Home Depot (HD) shares rose Tuesday morning after its third-quarter results came in above estimates and the retailer also lifted fiscal 2024 sales projections.

The home improvement giant reported revenue of $40.22 billion in the quarter, above the $39.25 billion analysts polled by Visible Alpha expected and the $37.71 billion the retailer generated a year ago. Net income came in at $3.65 billion, above the $3.58 billion consensus expectation but lower than last year's $3.81 billion.

Home Depot also updated its outlook for the full fiscal year, upping its projected revenue growth to about 4% year-over-year, up from 2.5% to 3.5% previously. The retailer also shifted its projection for comparable store sales, now expecting them to fall 2.5% from last year rather than a 3% to 4% decline.

Home Depot shares, which had gained about 17% since the start of the year through Monday's close, were up a further 1.6% to $415 after the results were released.

CEO Says 'Macroeconomic Uncertainty Remains'

"While macroeconomic uncertainty remains, our third-quarter performance exceeded our expectations," Home Depot Chief Executive Officer (CEO) Ted Decker said. "As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects as well as incremental sales related to hurricane demand."

The company didn't say anything in its earnings release specifically about the impact of the Federal Reserve's interest-rate cut during the quarter. Home Depot and rival Lowe's (LOW) have seen "big ticket" purchases like appliances and supplies for home improvement projects decline in recent quarters amid high interest rates and inflation that led many Americans to focus spending on essentials.

Analysts from JPMorgan recently wrote that the direction of mortgage rates should be closely monitored by Home Depot and Lowe's investors now that interest rates have started to come down.

If mortgage rates follow interest rates and housing becomes more affordable, the housing market could pick up and sales for Home Depot and Lowe's likely would benefit.

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