Home Depot Q2 earnings: ‘higher rates have been a positive for HD’

Home Depot Inc (NYSE: HD) says its sales are likely to take a hit this year – but its shares are still in the green at writing.

Home Depot reiterates full-year guidance

The home improvement retailer cautioned this morning that spending on big-ticket items was still under pressure.

To that end, it expects comparable sales to be down between 2.0% and 5.0% in its fiscal 2023. Earnings on a per-share basis are also expected to slide by up to 13%, as per the press release. According to Brian Nagel of Oppenheimer:

Home Depot knows how to manage expectations. There’s no benefit for them, given weather and macro concerns, to lift guidance. They’re playing for 2024 when you should see a resumption in home improvement.

Home Depot shares are currently up 5.0% versus the start of the year.

Why is Home Depot stock up today?

Shares of the New York listed firm are keeping resilient today partly because the management announced a $15 billion share repurchase programme. On CNBC’s “Squawk Box”, the Oppenheimer analyst also said:

Higher rates have been a positive for Home Depot [as] that’s encouraging people to stay in their existing homes and work on or enhance their existing homes.

Nagel’s outperform rating on shares of Home Depot comes with a price target of $360 that suggests about a 9.0% upside from here.

HD inched up on Tuesday also because the multinational reported market-beating results for its fiscal second quarter.

Notable figures in Home Depot Q2 earnings report

• Earned $4.66 billion versus the year ago $5.17 billion
• Per-share earnings also declined from $5.05 to $4.65
• Sales slipped 2.0% year-on-year to $42.92 billion
• Consensus was $4.45 a share on $42.19 billion in sales

A 2.0% decline in comparable sales in the recently concluded quarter was also less than expected. Oppenheimer’s Nagel concluded:

2023 is this reset year. We have seen the stock perform relatively well. But my recommendation is like I’d be buying this on any weakness in anticipation of better trends in 2024 and 2025.