Home Depot Up 4.1% Post Q3: Will The Bullish Trend Continue?

Shares of The Home Depot, Inc. (NYSE:HD) were up 4.1% since the company reported solid third-quarter fiscal 2017 results and issued upbeat outlook for the year. With this, the company retained its five-year long trend of beating earnings estimates. Its earnings have outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 3.9%. Also, this Zacks Rank #2 (Buy) stock has been witnessing solid upward earnings estimate revisions.

Home Depot posted fiscal third-quarter earnings of $1.84 per share, which escalated 15% from the year-ago quarter and also surpassed the Zacks Consensus Estimate of $1.81. Further, net sales grew 8.1% to $25,026 million, beating the Zacks Consensus Estimate of $24,523 million. Additionally, the overall comparable-store sales (comps) increased 7.9% while comps in the United States grew 7.7%.

Results gained from strength in the company’s core business. Its relentless focus on affording innovative products, boosting interconnected customer experience and driving productivity seems to be paying off. (Read more: Home Depot Lifts FY17 Outlook on Impressive Q3 Earnings)

Estimate Revisions & Impressive Outlook

The Zacks Consensus Estimate for fiscal 2017 has seen a boost in the past 30 days, increasing 5 cents per share to $7.36. Also, the earnings estimate revisions for the next year looks appealing. For fiscal 2018, the consensus mark has moved north from $8.24 per share to $8.31 in the said time frame. Additionally, the earnings estimates for the fiscal fourth quarter has increased by 2 cents to $1.61 in the past 30 days.

Management also raised its fiscal 2017 sales and earnings growth guidance on the back of solid year-to-date performance, robust strategies and estimates gains from hurricane recovery activities.

Home Depot now anticipates earnings per share to be up nearly 14% to $7.36 compared with the previous guidance of 13% growth to $7.29. Furthermore, the company now anticipates sales growth of nearly 6.3%, alongside a 6.5% increase in comps.

Near-Term Catalysts

Home Depot has been implementing several initiatives to drive growth. Evidently, the company has redesigned its website with enhanced features for better search and faster checkout, besides upgrading its mobile app. Moreover, its interconnected strategy goes beyond the dot.com investments as it continues to invest in fulfillment options to cater to customers’ demand through the launch of customer order management system (COM) and the Buy Online Deliver From Store (BODFS) capabilities.

Meanwhile, the world’s largest home improvement specialty retailer has been gaining from its focus on Professional Customers or Pro Customers. Also, it has undertaken several strides in this regard, which has helped Home Depot to reap significant benefits. Further, the acquisition of the Compact Power Equipment is likely to strengthen its portfolio service offerings for such customers. In addition, the company continued to reap the benefits of a steady housing market recovery and strong customer demand.

A glimpse of Home Depot’s share price reveals that it has rallied 30.7% in the past year, wider than the Retail – Building Products industry’s gain of 22.7%. Currently, the industry ranks in the top 40% (102 out of 256) of the Zacks Classified industries.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Three More Retail Stocks That Witnessed Positive Estimate Revisions

Stocks such as Hibbett Sports, Inc. (NASDAQ:HIBB) , Abercrombie & Fitch Co. (NYSE:ANF) and The Gap, Inc. (NYSE:GPS) have also witnessed solid upward revisions.

Hibbett’s earnings estimates for fiscal 2017 have moved up by 12 cents to $1.42 in the last seven days.

Abercrombie’s earnings estimates for fiscal 2017 have increased from a loss of a penny to earnings of 11 cents in the last 30 days.

Gap’s earnings estimates for fiscal 2017 have moved north by 3 cents to $2.10 in the last 30 days.

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