Home Depot earnings to remain strong despite weakening demand

Retail giant Home Depot is set to post its third-quarter earnings. The data are expected before trading opening on Nov. 15. 

U.S. company FactSet has already raised its own consensus for the retailer's earnings per share (EPS) and sales since the beginning of the quarter. Estimates show that Home Depot's growth for this fiscal year will be higher than expected, despite the overall downturn in the housing market and recession risks for the U.S. economy. 

Wells Fargo analyst Zachary Fadem said the outlook is rather ambiguous in the run-up to the retailer's report. There is a negative sentiment in the housing market, so projections on the value of Home Depot shares are going to be revised downward. However, there is no complete certainty about the outcome. 

Fadem also stated that the third-quarter report could demonstrate the company's sustained development, as the business model Home Depot has chosen, is fully justified in the current environment. 

Michael Baker, senior analyst at DA Davidson, believes the retailer has the best chance of outperforming market expectations for third-quarter sales compared to other major retailers. Figures show an upsurge for the industry as a whole. 

The expert notes that the reason is not the market's overstated expectations, but Home Depot's initially low forecasts. The company is likely to improve its estimates before it releases the results. 

Upon publishing its second-quarter report, the company said total sales in 2022 could increase by 3.0%, while earnings per share growth would be a few points in percentage terms.

Wall Street's hopes before the release of Home Depot's third-quarter report are as follows:

EPS is expected to reach $4.12. The corporation’s performance remained at $4.09 in the second quarter. Meanwhile, the company surpassed earnings per share estimates for the last nine quarters. 

Total sales are going to be $37.92 billion. Earlier, the figure stood at $37.85 billion. Thus, these indicators proved to be the best for the past 11 quarters. 

Investors should also pay attention to the management's statements on demand. As Home Depot CEO Ted Decker announced, the highest quarterly sales and profits in the company’s history were recorded due to the steady demand for home improvement projects.