3 Reasons Investors Are Confident Ahead Of Home Depot's Earnings

The Home Depot, Inc. HD is set to report earnings for the third quarter of the year on Tuesday, November 18 before the market opens. Over the past couple years Home Depot's performance has been improving on the bottom line, the company has been buying back stock, and a recent pickup in housing data has investors optimistic about this week's report.

Analysts on Estimize are expecting Home Depot to announce earnings of $1.15 per share, topping Wall Steet's EPS consensus by 2 cents. In August Home Depot had a huge win when it came out with earnings of $1.52 per share, beating the the Street's consensus by 8 cents per share and coming in 7 cents above the forecast from Estimize. Company stock jumped 8.2 percent higher over the 3 days after last quarter's results and Home Depot shares have continued to show strength throughout the quarter heading into Tuesday's report.

(Graph above from ChartIQ Visual Earnings)

Tuesday contributing analysts on Estimize are looking for 21 percent earnings growth which is a tick down from the 23 percent gain reported last quarter. However, a 21 percent boost to the bottom line would still be the second best quarter recorded over the previous 12 months.  

While profit gains have been robust lately, revenue improvements have been more modest.  In the first two quarters of this year Home Depot reported sales growth of 3 percent and 6 percent respectively.

For the third quarter the Estimize community is projecting a 5 percent improvement. A 5 percent gain would be the company's second best quarter reported over the past year, bested only by the 6 percent increase registered over the summer.

Since April of this year home sales have been trending higher. Alongside rising housing numbers we've also seen earnings expectations on the Estimize platform surge. Since September the Estimize revenue consensus has increased by $76 million and Wall Street recently raised its estimates too.

The Street's EPS consensus has climbed from $1.11 in July to $1.13 ahead of the report while the Estimize consensus also jumped 2 cents higher from $1.13 to $1.15. Upward analyst estimate revisions heading into a report are often a bullish indicator.

In addition to posting strong results in the second quarter Home Depot also raised its guidance for the year citing an improved outlook. Stock buybacks are also a factor fueling EPS growth. As of August Home Depot had already repurchased $3.5 billion worth of shares this year and had the intent to purchase another $3.5 billion of stock before the end of the year.

Between Home Depot's falling number of shares outstanding, modestly improving sales, and a pickup in the housing market Estimize analysts are confident that the company can deliver strong EPS results and are setting the bar high accordingly.