Home Depot Stock Rises After Better Than Expected Q2 Earnings

by | Aug 20, 2019 | Markets

The company’s shares were up nearly 5% by mid-morning.

Investors bracing themselves for bad news were pleasantly surprised by Home Depot’s latest earnings report. The company released its fiscal second-quarter earnings report today and the results, while not great, were better than expected. 

Home Depot lowered its outlook for the remainder of the year and its sales were short of estimates. But the company’s earnings beat forecasts, giving many investors confidence that the company is on the right track for the remainder of 2019. 

An overview of Home Depot’s earnings report

 Here is an overview of the company’s second-quarter earnings report:

  • Earnings: $3.17 per share as opposed to $3.08 forecasted
  • Revenue: $30.84 billion as opposed to $30.99 billion forecasted
  • Same-store sales: Grew by 3% as opposed to 3.5% forecasted

In some ways, it’s surprising that investors reacted as favorably as they did since the earnings results seem pretty unimpressive. Home Depot’s sales fell short during the second quarter, which was largely attributed to a weakening housing market. 

And Home Depot executives didn’t shy away from talking about trade war concerns and how they may affect the company going forward. The company lowered its full-year guidance since the trade war will likely affect consumer spending. 

The company now predicts that full-year sales will be up 2.3%, instead of the forecasted 3.3%. And the company expects same-store sales to increase by 4%, instead of the forecasted 5%. 

However, the company did maintain its forecasted full-year earnings. And management ended the investor call on a positive note. CEO Craig Menear said the company is seeing progress from previous strategic investments it made. 

Next steps

All in all, Home Depot’s earnings report wasn’t great and year-over-year comparisons are tough. But it did show signs that the company is making progress. Sales are starting to pick up, though not as quickly as analysts anticipated. 

Investors reacted favorably to the news and Home Depot’s shares rose more than 4% as a result. That means the company’s stock is up more than 21% in 2019, outpacing the S&P 500’s gain of 16%. One Wells Fargo analyst summed up the earnings report, saying that it is “a clearing event for an improving setup ahead.”