Home Depot beats on EPS, misses on revenue, and cut its forecast
When companies report earnings, expectations mean everything. In the case of home improvement retailer Home Depot (NYSE: HD), expectations must not have been too high. The company beat on its EPS estimates with actual earnings of $3.17 versus estimates of $3.08. While that is good news, the company missed on its revenue estimate and it issued a lower revenue forecast for 2019 as a whole. Normally, beating EPS estimates by a small margin, missing on revenue estimates and issuing a more cautious outlook would send a stock down. But that wasn’t the case for Home Depot on Tuesday. The stock gained 4.65% on the day while the overall market was lower.
From a fundamental perspective, Home Depot has been pretty solid over the last few years. The company has been able to grow earnings at a rate of 22% per year over the last three years. The profit margin is also solid at 13.7%. The operating margin is at 14.59% and return on assets is at 20.36%. The return on equity wasn’t available at the time of this writing due to the recent earnings report.
One of the things that helped Home Depot move higher was a share buyback program that reduced the number of shares outstanding dramatically.
The Tickeron SMR rating for this company is 2, indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents.
The Tickeron Valuation Rating of 5 indicates that the company is seriously undervalued in the industry. A rating of 1 points to the most undervalued stocks, while a rating of 100 points to the most overvalued stocks. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. The stock’s price-to-book ratio is below average for the industry and its P/E ratio is also below average.
The Tickeron Profit vs. Risk rating for this company is 17, indicating a low risk on high returns. The average Profit vs. Risk rating for the industry is 62, placing this stock better than average.
The chart for Home Depot shows the stock trending higher within a trend channel over the last eight months. The upper rail connects the highs from November and April. The lower rail connects the lows from December, May, and now August.
The daily stochastic readings were in oversold territory just ahead of the earnings report and turned sharply higher after the report.
The weekly chart shows that the stock is approaching an all-time high while the overbought/oversold indicators are not yet in overbought territory, but are closing in on those levels.
Sentiment toward Home Depot is a little more bearish than the average stock. There are 32 analysts following the stock with 20 “buy” ratings, 11 “hold” ratings, and one “sell” rating. This puts the overall buy percentage at 62.5% and that is slightly below the average range of 65% to 75%.
The short interest ratio is currently at 3.54 and is also slightly above average. The total number of shares sold short had been creeping up ahead of the earnings report and that is an indication of increasing pessimism.
The overall picture for Home Depot is rather positive with the solid fundamentals, the solid upward trend in the price, and the slightly more pessimistic sentiment toward the stock. Of course the lowered forecast is a bit of a concern and the company cited the tariffs on Chinese goods as part of the issue. The company also cited falling lumber prices for the lowered sales forecast.
HD's RSI Oscillator ascends from oversold territory
The RSI Oscillator for HD moved out of oversold territory on December 20, 2024. This could be a sign that the stock is shifting from a downward trend to an upward trend. Traders may want to buy the stock or call options. The A.I.dvisor looked at 24 similar instances when the indicator left oversold territory. In of the 24 cases the stock moved higher. This puts the odds of a move higher at .
Technical Analysis (Indicators)
Bullish Trend Analysis
The Stochastic Oscillator shows that the ticker has stayed in the oversold zone for 9 days. The price of this ticker is presumed to bounce back soon, since the longer the ticker stays in the oversold zone, the more promptly an upward trend is expected.
Following a 3-day Advance, the price is estimated to grow further. Considering data from situations where HD advanced for three days, in of 356 cases, the price rose further within the following month. The odds of a continued upward trend are .
HD may jump back above the lower band and head toward the middle band. Traders may consider buying the stock or exploring call options.
The Aroon Indicator entered an Uptrend today. In of 347 cases where HD Aroon's Indicator entered an Uptrend, the price rose further within the following month. The odds of a continued Uptrend are .
Bearish Trend Analysis
The Momentum Indicator moved below the 0 level on December 10, 2024. You may want to consider selling the stock, shorting the stock, or exploring put options on HD as a result. In of 85 cases where the Momentum Indicator fell below 0, the stock fell further within the subsequent month. The odds of a continued downward trend are .
The Moving Average Convergence Divergence Histogram (MACD) for HD turned negative on December 11, 2024. This could be a sign that the stock is set to turn lower in the coming weeks. Traders may want to sell the stock or buy put options. Tickeron's A.I.dvisor looked at 53 similar instances when the indicator turned negative. In of the 53 cases the stock turned lower in the days that followed. This puts the odds of success at .
HD moved below its 50-day moving average on December 17, 2024 date and that indicates a change from an upward trend to a downward trend.
The 10-day moving average for HD crossed bearishly below the 50-day moving average on December 23, 2024. This indicates that the trend has shifted lower and could be considered a sell signal. In of 15 past instances when the 10-day crossed below the 50-day, the stock continued to move higher over the following month. The odds of a continued downward trend are .
Following a 3-day decline, the stock is projected to fall further. Considering past instances where HD declined for three days, the price rose further in of 62 cases within the following month. The odds of a continued downward trend are .
The Tickeron SMR rating for this company is (best 1 - 100 worst), indicating very strong sales and a profitable business model. SMR (Sales, Margin, Return on Equity) rating is based on comparative analysis of weighted Sales, Income Margin and Return on Equity values compared against S&P 500 index constituents. The weighted SMR value is a proprietary formula developed by Tickeron and represents an overall profitability measure for a stock.
The Tickeron Profit vs. Risk Rating rating for this company is (best 1 - 100 worst), indicating low risk on high returns. The average Profit vs. Risk Rating rating for the industry is 75, placing this stock better than average.
The Tickeron PE Growth Rating for this company is (best 1 - 100 worst), pointing to consistent earnings growth. The PE Growth rating is based on a comparative analysis of stock PE ratio increase over the last 12 months compared against S&P 500 index constituents.
The Tickeron Price Growth Rating for this company is (best 1 - 100 worst), indicating steady price growth. HD’s price grows at a higher rate over the last 12 months as compared to S&P 500 index constituents.
The Tickeron Valuation Rating of (best 1 - 100 worst) indicates that the company is significantly overvalued in the industry. This rating compares market capitalization estimated by our proprietary formula with the current market capitalization. This rating is based on the following metrics, as compared to industry averages: HD's P/B Ratio (344.828) is very high in comparison to the industry average of (12.393). P/E Ratio (24.357) is within average values for comparable stocks, (36.657). Projected Growth (PEG Ratio) (2.045) is also within normal values, averaging (2.650). Dividend Yield (0.023) settles around the average of (0.034) among similar stocks. P/S Ratio (2.415) is also within normal values, averaging (19.235).
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a retailer of assortment of building materials and home improvement products
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