Home Depot Takes Center Stage: Upcoming Earnings Report Sheds Light On US Economic Health

Home Depot Inc HD, whose earnings are widely seen as an indicator of the economic health of U.S. households, is set to issue a first quarter report on Tuesday, before market open. Here's what investors need to know about the stock, and what it could portend for the U.S. economy in the near future.

By The Numbers: Investors are expecting the Atlanta-based company to issue earnings of $3.48 per share on revenues of $35.02 billion. This would come under the $4.09 per share on revenues of $38.91 billion the home improvement retailer issued last year in the first quarter.

KeyBanc Capital Markets analyst Brad Thomas issued a note Monday, providing valuable insights into the company's outlook.

KeyBanc's second quarter Home Improvement Contractor Survey indicates stable near-term trends for home improvement professionals, but projects a slower growth rate in the future.

The survey, conducted across more than 20 industries, showed that 59% of respondents expect higher revenues in the near term and 62% next year.

However, it's a deceleration from last year’s expectations, with near-term growth predicted at +3.5%, down from +5.9% in the second quarter of 2022.

Growth expectations for next year were lowered to +2.6% from the +3.1% cited last quarter.

Notably, weaker consumer confidence remains the primary concern among respondents.

Read also: Retail Sales Preview: Will Consumer Demand Fall? How Markets Reacted To Prior Reports

Professional contractors surveyed continued to favor HD over Lowe's Companies Inc LOW. Factors including the Pro program, convenient locations, digital and mobile applications, and better product availability were key reasons for the preference.

However, those who preferred Home Depot over Lowe's anticipate a weaker near-term and next year revenue outlook.

In terms of sector-specific insights, a survey focused on paint contractors revealed a stable-to-modestly optimistic outlook for the U.S. architectural paint market. This could serve as an incremental positive for companies like PPG Industries, Inc. PPG and Sherwin-Williams Co SHW.

With HD’s earnings report in view, KeyBanc lowered its first quarter comp and EPS estimates due to unfavorable weather in March and weaker spending trends. Despite KeyBanc's estimate, both Home Depot and Lowe's could reiterate 2023 sales and EPS guidance, indicating resilience in the sector despite economic challenges.

Lowe's is expected to issue earnings on May 23.

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Photo: Courtesy of Mike Mozart on flickr