Home Depot (NYSE:HD) stock is a little volatile but mostly flat this morning after the company reported stronger-than-expected second-quarter financial results but reduced its full-year sales and profit guidance. The retailer noted that its performance was negatively impacted by “higher interest rates and greater macroeconomic uncertainty.”
Home Depot’s Q2 Results and Guidance Cuts
The company’s revenue increased 0.7% last quarter versus the same period a year earlier to $43.2 billion. The latter figure was well above analysts’ average estimate of $3.83 billion. The firm’s earnings per share came in at $4.67, little changed versus Q2 of 2023. Analysts, on average, had expected the retailer to generate EPS of $4.55.
However, Home Depot’s sales at comparable stores sank 3.3% year-over-year.
On the guidance front, the firm now expects its comparable sales to fall 3% to 4% this year, versus its previous outlook of a 1% decline. Moreover, it predicts that its EPS will sink 1% to 3% for the full year, compared with its previous estimate of a 1% increase.
Home Depot’s Cautious Comments
Home Depot CEO Edward Decker reported that, in Q2, “higher interest rates and greater macroeconomic uncertainty pressured consumer demand more broadly, resulting in weaker spend across home improvement projects.” Moreover, the recent increase in the U.S. unemployment rate could also negatively affect the firm’s outlook.
HD Stock: Reasons for Optimism
On a positive note, interest rates have tumbled in recent weeks. The interest rate on the U.S. 10-year bond has tumbled from 4.67% on April 26 to 3.86% currently.
Moreover, on June 26, investment bank DA Davidson upgraded its rating on HD stock to “buy” from “neutral.” The bank expected the firm to benefit from the decline in interest rates. That trend could play out later this year or in 2025, boosting the retailer’s shares in the process.
The shares have changed little so far this year, but they have dropped 6% in the last month.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
