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Analysts Don't Hate Home Depot After Earnings

Analysts Don't Hate Home Depot After Earnings

Shares of Home Depot Inc (NYSE: HD) rose to new 52-week highs on Tuesday after the company reported its second-quarter results.

Here is a roundup of what some of Wall Street's top analysts are saying after the print.

Credit Suisse: ‘Solid' Quarter

Seth Sigman of Credit Suisse commented in a note that Home Depot reported a "solid" quarter, "better" U.S. comps, "modest" gross margin improvements, "better" SG&A leverage, and "greater" planned buybacks in the second half of 2015.

Sigman noted that total comps of 4.2 percent exceeded published estimates of 3.6 percent. Meanwhile, U.S. comps actually declined to 5.7 percent from 7.1 percent in the first quarter, but still marked an acceleration on a two- and three-year basis. The analyst added that big ticket items helped to lift comps, driven by outperform of the Pro segment.

Sigman also pointed out that Home Depot may have outperformed external data points such as Census retail sales despite weather having played a factor in certain markets.

Bottom line, expectations moved higher heading into the print, but Home Depot showed its business remains "very encouraging."

Shares remain Outperform rated with an unchanged $120 price target.

Related Link: Home Depot Improves To New All-Time High After Q2 Beat, Raised Guidance

Deutsche Bank: Margins In Line, Comps Better Than Expected

Mike Baker of Deutsche Bank commented in a note that Home Depot's total comps were 4.2 percent (exceeding his expectations of 3.5 percent) while the total two-year stacked accelerated to 10.0 percent from 8.7 percent. The analyst also noted that total industry sales "only" grew by 1.6 percent, which implied the company's 4.2 percent comp was 260 basis points better and marks a wider spread than typical.

Baker also noted that Home Depot's operating margins were 15.1 percent (just above the 15.0 percent the consensus estimate was calling for) as gross margins of 33.7 percent were up six basis points and total expenses were leveraged 52 basis points after onetime costs.

The analyst also stated that while Home Depot continued its "impressive" streak of 24 quarters in a row of up operating margins, the most recent quarter's increase represents the smallest the company has seen since the fourth quarter of 2009 (excluding the fourth quarter of 2013 which had one few week than a year ago).

Finally, Baker pointed out that Home Depot increased its comp guidance to 4.1-4.9 percent (from 4.0-4.6 percent), which implies a 3.0-4.75 percent comp for the back half of the year and actually falls short of the 5.2 percent in the first half of the year.

Shares remain Hold rated with an unchanged $110 price target.

Goldman Sachs: Company Delivered As Expected

Matthew Fassler of Goldman Sachs commented briefly in a note that the market was expecting Home Depot to deliver a "solid" print -- and that is what the company did. The analyst also noted this was "no small feat in a choppier consumer backdrop" as momentum accelerated through the quarter, with July being the strongest month.

Shares remain Neutral rated with an unchanged $127 price target but will be reviewed following the company's post-earnings conference call and further analysis.

Morgan Stanley: ‘Market Leadership'

Simeon Gutman of Morgan Stanley commented in a note that Home Depot's results "continue to shine" despite a "noisy" quarter for retail sales and the Home Improvement segment.

Gutman also noted that Home Depot's U.S. comps of 5.7 percent marked a "solid absolute performance" and was much better than expected given the "perceived choppiness" in June.

In fact, the analyst suggested that based on government data, Home Improvement sales were only "decent" in May, "weak" in June and only rebounded in July. Despite the data, the company demonstrated sequentially stronger comps which proves its value proposition to both the do-it-yourself and profession consumer bases.

Shares remain Equal-weight rated with a price target raised to $128 from a previous $126.

Latest Ratings for HD

Apr 2021Loop CapitalMaintainsBuy
Mar 2021Wells FargoMaintainsOverweight
Mar 2021CitigroupInitiates Coverage OnBuy

View More Analyst Ratings for HD
View the Latest Analyst Ratings


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