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Home Depot (HD) Stock Sinks As Market Gains: What You Should Know

Zacks Equity Research

Home Depot (HD) closed at $248.15 in the latest trading session, marking a -0.94% move from the prior day. This move lagged the S&P 500's daily gain of 0.5%. Elsewhere, the Dow lost 0.3%, while the tech-heavy Nasdaq added 0.95%.

Coming into today, shares of the home-improvement retailer had lost 0.87% in the past month. In that same time, the Retail-Wholesale sector gained 5.44%, while the S&P 500 gained 1.89%.

HD will be looking to display strength as it nears its next earnings release. In that report, analysts expect HD to post earnings of $3.23 per share. This would mark year-over-year growth of 1.89%. Meanwhile, our latest consensus estimate is calling for revenue of $32.88 billion, up 6.61% from the prior-year quarter.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $9.91 per share and revenue of $115.40 billion. These totals would mark changes of -3.32% and +4.7%, respectively, from last year.

Investors might also notice recent changes to analyst estimates for HD. Recent revisions tend to reflect the latest near-term business trends. As such, positive estimate revisions reflect analyst optimism about the company's business and profitability.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 1.07% higher. HD is currently sporting a Zacks Rank of #3 (Hold).

In terms of valuation, HD is currently trading at a Forward P/E ratio of 25.28. Its industry sports an average Forward P/E of 18.34, so we one might conclude that HD is trading at a premium comparatively.

Meanwhile, HD's PEG ratio is currently 2.24. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Building Products - Retail was holding an average PEG ratio of 1.38 at yesterday's closing price.

The Building Products - Retail industry is part of the Retail-Wholesale sector. This industry currently has a Zacks Industry Rank of 18, which puts it in the top 8% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

Be sure to follow all of these stock-moving metrics, and many more, on Zacks.com.


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