Will Pro Business Drive Home Depot's (HD) Growth in 2022?

·5-min read

The Professional (“Pro”) customers have been the key to The Home Depot Inc’s HD growth over the past several years. The company’s Pro segment’s sales have been outpacing DIY sales for the past several quarters. Its efforts to fortify the offerings for Pro customers have contributed significantly to this growth. Continued strength in the segment is likely to go a long way in driving the stock’s growth in 2022.

Additionally, the company remains poised for growth in 2022, driven by the momentum in the home improvement industry, which has been benefiting from sustained demand for home-improvement projects and a robust housing market. Home Depot is also benefiting from its digital momentum and ongoing investments. It remains on track with the execution of the “One Home Depot” investment plan, which bodes well.

Driven by the factors, the Zacks Rank #1 (Strong Buy) company’s shares have rallied 33.8% in the past year compared with the industry’s growth of 33.3%. The stock comfortably outpaced the S&P 500’s growth of 21.6% and the Retail-Wholesale sector’s decline of 16.3% in the same period.

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Pro Business Remains Strong

Home Depot’s Pro segment has been a key growth driver, with the Pro segment witnessing robust sales growth for the past several quarters. Growth in the Pro segment reflects significant demand for larger projects in the home improvement industry. In the quarter, HD witnessed strength in several Pro-heavy categories like drywall, pipe and fittings, and several mill-work categories.

The company expects continued sales growth from Pros as project demand remains strong and their backlogs are growing. Home Depot remains on track with its strategic investments to build a Pro ecosystem, including professional-grade products, exclusive brands, enhanced delivery, credit, digital capabilities, field sales support and HD rental. The company expects its differentiated Pro ecosystem to help in deeper engagement with Pro customers in the long term.

Recently, Home Depot augmented the commercial credit offerings for Pro customers and their businesses through the launch of The Pro Xtra Credit Card. The new card features a revised Commercial Revolving Charge and updates to its Commercial Account Card. The credit options will be powered by Citi Retail Services, one of North America's largest and most experienced retail credit solution providers.

With the expanded commercial credit program, the company expects to assist its Pro customers in saving both time and money. The Pro Xtra Credit Card will have the option to be linked to the Pro Xtra loyalty program so that registered customers can earn Pro Xtra Perks four times faster on card purchases.

The company’s Pro Xtra loyalty program provides member-only benefits, including volume pricing, exclusive product offers, paint rewards, and perks. The company will reward Pro Xtra members with a $100 credit on registering for the Pro Xtra Credit Card.

Other Growth Drivers

Home Depot is on track with the execution of the “One Home Depot” investment plan, which focuses on expanding supply-chain facilities, technology investments and enhancement to the digital experience. The company continues to leverage the momentum in strategic investments to enhance the interconnected experience to support its goals of driving growth faster than the market in any environment, strengthening its position as a low-cost provider in home improvement and delivering exceptional shareholder value.

The interconnected retail strategy and underlying technology infrastructure have aided in consistently driving web traffic for the past few quarters. Sales, leveraging the digital platforms, rose 8% in the fiscal third quarter. On a two-year stack basis, sales from digital platforms increased nearly 95%. Around 55% of the online orders were delivered from a store.

Another key component of delivering an interconnected experience is enhanced delivery and fulfillment options. Over the years, the company has created the fastest and most efficient delivery network in home improvement through options like buy online pick up in store with convenient pickup lockers, buy online deliver from store with express car and van delivery, and curbside pickup.

Other Stocks to Bet On

We have highlighted some other top-ranked stocks from the broader Retail-Wholesale space, namely Builders FirstSource BLDR, GMS Inc. GMS and Fastenal FAST.

Builders FirstSource currently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 71.5%, on average. Shares of BLDR have surged 83.1% in the past year.

You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Builders FirstSource's current financial-year sales suggests growth of 129.1% and that for earnings per share reflects growth of 207.6% from the year-ago period's reported figure.

GMS, a Zacks Rank #1 stock, has a trailing four-quarter earnings surprise of 24.9%, on average. The GMS stock has gained 60.5% in a year.

The Zacks Consensus Estimate for GMS’ current financial-year sales and earnings per share suggests growth of 36.7% and 100.6%, respectively, from the year-ago period's reported numbers.

Fastenal currently flaunts a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 2%, on average. Shares of the company have gained 19.9% in the past year.

The Zacks Consensus Estimate for Fastenal’s current financial-year sales and earnings per share suggests growth of 5.8% and 5.4%, respectively, from the year-ago period. FAST has an expected long-term earnings growth rate of 9%.

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The Home Depot, Inc. (HD) : Free Stock Analysis Report

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