Taking on analysts’ expectations and winning: The Home Depot Inc. (HD)

The Home Depot Inc. (NYSE: HD) stock jumped 0.26% on Friday to $307.17 against a previous-day closing price of $306.37. With 2.72 million shares changed hands, the volume of the stock remained lighter than its average volume of 4.07 million shares. During the session, the Home Improvement Retail company that operates in wider Consumer Cyclical sector, reached to the highest price of $309.97 whereas the lowest price it dropped to was $304.44. The 52-week range on HD shows that it touched its highest point at $420.61 and its lowest point at $264.51 during that stretch. It currently has a 1-year price target of $347.99. With its current market cap of 313.57 billion, HD has annualized dividend of $7.60 while the current yield stands at 2.47%. Beta for the stock currently stands at 1.00.

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Price Performance and Earnings:

Stock performance is one of the indicators that investors use to determine whether they will profit from a stock. The price performance of HD was up-trending over the past week, with a rise of 2.52%, but this was up by 8.32% over a month. Three-month performance dropped to -2.58% while six-month performance fell -17.81%. The stock lost -7.01% in the past year, while it has lost -25.98% so far this year. A look at the trailing 12-month EPS for HD yields 15.75 with Next year EPS estimates of 17.33. For the next quarter, that number is 4.95. This implies an EPS growth rate of 30.10% for this year and 5.27% for next year. EPS is expected to grow by 14.60% annually over the next five years; however, over the past five years, the company experienced an annual growth rate of 19.20%.

Float and Shares Shorts:

At present, 1.03 billion HD shares are outstanding with a float of 1.03 billion shares on hand for trading. On Jul 14, 2022, short shares totaled 7.84 million, which was 0.76% higher than short shares on Jun 14, 2022. In addition to Mr. Edward P. Decker as the firm’s Pres, CEO & Director, Mr. Richard V. McPhail serves as its Exec. VP & CFO.

Institutional Ownership:

Through their ownership of 71.07% of HD’s outstanding shares, institutional investors have majority control over the company. Other institutions hold 4.16% of HD, in contrast to 37.74% held by mutual funds. Shares owned by individuals account for 33.86%. As the largest shareholder in HD with 8.66% of the stake, The Vanguard Group, Inc. holds 88,975,120 shares worth 88,975,120. A second-largest stockholder of HD, BlackRock Fund Advisors, holds 46,629,853 shares, controlling over 4.54% of the firm’s shares. SSgA Funds Management, Inc. is the third largest shareholder in HD, holding 45,622,114 shares or 4.44% stake. With a 2.95% stake in HD, the Vanguard Total Stock Market Index is the largest stakeholder. A total of 30,303,660 shares are owned by the mutual fund manager. The Vanguard 500 Index Fund, which owns about 2.23% of HD stock, is the second-largest Mutual Fund holder. It holds 22,872,501 shares valued at 6.27 billion. SPDR S&P 500 ETF Trust holds 1.09% of the stake in HD, owning 11,161,270 shares worth 3.06 billion.

An Overview of Recent Financials:

Understanding a company as a customer does not mean you will understand it as an investor. The wise investor uses quantitative research to analyze metrics such as revenue, net income, and earnings. In its fiscal quarter reported on Apr 30, 2022, HD reported revenue of $38.91B and operating income of $5.93B. Over the past year, revenue came in at $152.56B while operating income stood at $23.19B. It generated $4.23B net income for the quarter, which came to $16.52B over the last twelve months. The EBITDA in the recently reported quarter was $6.66B and diluted EPS was $4.09. EBITDA for the full year was $26.11B.

Analysts Ratings:

Reading analyst opinions is an effective way to decide where to invest, and there are several opinions available for HD since 34 analysts follow the stock currently. There are 18 analysts who recommend BUY ratings, while 0 suggest SELL ratings. Of the remaining analysts, 10 believe that the stock is worth HOLDING, 6 give it an OVERWEIGHT rating, and 0 thinks that it’s UNDERWEIGHT. In the same way, a target price assigned to a stock can also reveal much about its potential. With HD analysts setting a high price target of $470.00 and a low target of $285.00, the average target price over the next 12 months is $348.47. Based on these targets, HD could surge 53.01% to reach the target high and fall by -7.22% to reach the target low. Reaching the average price target will result in a growth of 13.45% from current levels.

EPS: Estimates vs Actual

It is also common to use earnings estimates to evaluate a firm’s growth potential and to determine trading strategy. HD will report FY 2023 earnings on 02/21/2023. Analysts have provided yearly estimates in a range of $16.85 being high and $16.05 being low. For HD, this leads to a yearly average estimate of $16.47. The earnings surprise of a firm occurs when the actual results change from the consensus earnings estimate. The Home Depot Inc. surprised analysts by $0.40 when it reported $4.09 EPS against a consensus estimate of $3.69. The surprise factor in the prior quarter was $0.03. Based on analyst estimates, the high estimate for the next quarter is $5.13 and the low estimate is $4.76. The average estimate for the next quarter is thus $4.95.

Summary of Insider Activity:

Insiders traded HD stock several times over the past three months with 6 Buys and 5 Sells. In these transactions, 14,231 shares were bought while 11,687 shares were sold. The number of buy transactions has increased to 38 while that of sell transactions has risen to 56 over the past year. The total number of shares bought during that period was 269,392 while 200,375 shares were sold.

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