The Home Depot's stock experienced a notable surge as it climbed 3.8% on Tuesday following the release of its fiscal fourth-quarter earnings in the premarket. The share price reached an area near the 200-day Simple Moving Average (SMA), reflecting increased investor interest. This positive movement came despite concerns over the future of the U.S. housing market, as expressed by the company's Chief Financial Officer, Richard McPhail.
Home Depot reported adjusted earnings per share (EPS) of $3.13, surpassing Wall Street's consensus by $0.09. The company's revenue amounted to $39.7 billion, exceeding the average estimate by $630 million. These figures represented a year-over-year increase of 11% for adjusted EPS and 14% for reported revenue. Notably, U.S. comparable sales rose by 1.3%, while worldwide comparable sales saw a more modest increase of 0.8%.
Richard McPhail, speaking to CNBC, acknowledged that the U.S. housing market is unlikely to recover until 2025 due to high interest rates and elevated housing costs. Despite this sobering outlook, McPhail pointed to positive developments within the home improvement category.
"Home improvement always persists, and so the question, I think, will be around the mindset of whether long-term rates have gotten to a new normal,” – CFO McPhail
The Home Depot's share price faces a resistance level above $435, where price dynamics previously halted between November 26 and December 9 of last year. The company's 100-day SMA is positioned near $407, which could serve as a potential level for investors to book profits. Additionally, the stock price shows similarities to a Morning Star pattern, which could signal bullish momentum if Tuesday's trading session concludes with the candle closing above last Friday's open at $396.40.
In terms of shareholder returns, The Home Depot Board approved an increase in the company’s quarterly dividend by 2.2%, bringing it to $2.30 per share. However, management projects a slowdown in total sales growth from 3.4% in 2024 to 2.8% in the current fiscal year. Additionally, the company anticipates a 2% decline in adjusted diluted EPS compared to 2024, despite plans to add 13 new stores.
While The Home Depot has successfully beaten consensus estimates for its fiscal fourth-quarter earnings, with both revenue and EPS exceeding expectations, it faces challenges in sustaining growth amid a sluggish housing market. The company's management remains cautiously optimistic about the home improvement sector's resilience despite broader economic uncertainties.