What To Make Of Home Depot’s Soft Earnings Beat

Dear Rundown Reader,

Big week for retail.

Macy’s, JCPenney, Walmart, and Home Depot all report this week among others.

Additionally, the U.S. Census Bureau will release its quarterly retail sales data this morning.

We can expect a lot of action in retail stocks this week.

Today, we break down Home Depot’s report and show you what their soft beat means for folks moving forward.

Your Rundown for Tuesday, May 15, 2018…

Home Depot Misses Key Sales Target

Home Depot (NYSE: HD) reported earnings this morning.

Overall you could call it a beat.

But softer than expected sales are the headline folks are keying in on this morning.

HD posted earnings of $2.08 per share, beating consensus estimates of $2.05.

But revenue only rose 4.4% to $24.9 billion, missing Wall Street’s estimates of $25.16 billion, as reported by Bloomberg.

HD executives claim a “slow start to the spring selling season” the reason for the miss.

Specifically, sales fell 1.3% for the quarter, as reported by Reuters.

As a result, shares were down as much as 3% in pre-market trading this morning.

Despite this miss, and today’s pre-market slide, the stock is still up for the past week. As the chart for the past five days shows.

HD

HD’s largest headwind appears to be temporary.

Experts citing a longer than expected winter as the main culprit for the sales slump.

It makes sense.

Spring is when companies like HD see a nice sales jump. The weather warms, people begin landscaping and start new home renovations.

But a longer than expected winter has put a damper on this year’s spring surge.

But the weather effect is temporary.

The real potential headwind for HD is the housing market.

Reuters reports recent homebuilding data “suggested that construction activity may be slowing, as single-family home building — which accounts for the biggest share of the housing market — fell 3.7%.”

Higher mortgage rates and material costs, due to rising oil prices and inflation, could turn this short-term headwind into a long-term one.

The takeaway here is, don’t worry about this weather related sales slump. That will fix itself.

Folks with positions in HD need to watch the housing data closely.

Mortgage rates and building costs are your real tell-all when forecasting HD’s future.

Now, turning to the markets this morning…

Market Rundown for Tues., May 15

S&P 500 futures are down 7.00 at 2,724.

Oil’s up $0.58 to $71.54.

Gold’s down $11.90 to $1,306.

Bitcoin rebounds a bit now at $8,758 this morning, according to CoinDesk.

We’ll talk again tomorrow.

For the Rundown,

Aaron Gentzler

Aaron Gentzler

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Aaron Gentzler

Aaron Gentzler is the Publisher of Seven Figure Publishing. He's been researching and writing about technology and markets for over a decade and is a graduate of Penn State and Johns Hopkins.

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