Why Is Home Depot (HD) Up 2.7% Since Last Earnings Report?

A month has gone by since the last earnings report for Home Depot (HD). Shares have added about 2.7% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Home Depot due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. Home Depot Q3 Earnings & Sales Beat, Raises ViewHome Depot has reported third-quarter fiscal 2024 results, wherein earnings and sales surpassed the Zacks Consensus Estimate. Meanwhile, the company’s top line improved year over year in the third quarter of fiscal 2024, while earnings per share declined year over year.Home Depot's adjusted earnings of $3.78 per share declined 1.8% from $3.85 in the year-ago quarter. However, the bottom line beat the Zacks Consensus Estimate of $3.65.Net sales advanced 6.6% to $40.2 billion from $37.7 billion in the year-ago quarter. Also, sales surpassed the Zacks Consensus Estimate of $39.33 billion. The company’s sales included contributions from the recently completed acquisition of SRS Distribution Inc.HD is confident about its initiatives to strengthen the business. It has been on track with its investments to craft the best inter-connected experience for customers, improving the pro wallet through its unique ecosystem of capabilities and expanding stores. It is also optimistic about the future of the home improvement industry and its ability to expand market share in this space.Detailed Picture of HD’s Q3 ResultsHome Depot's comparable sales fell 1.3% in the reported quarter. The company’s comparable sales in the United States declined 1.2% in the fiscal third quarter. The decline resulted from decreases in customer transactions and the average ticket. In the fiscal third quarter, customer transactions moved down 0.2% year over year, whereas the average ticket was down 0.8%. Sales per retail square foot fell 2.1% in the reported quarter.In dollar terms, the gross profit rose 5.4% year over year to $13.4 billion in the fiscal third quarter. However, the gross margin of 33.4% contracted 40 basis points (bps) year over year in the reported quarter.SG&A expenses of $7.2 billion increased 8.5% from $6.6 billion in the year-ago quarter. SG&A expenses, as a percentage of sales, grew 30 bps year over year to 17.9%.The adjusted operating income rose 1.9% year over year to $5.6 billion, while the adjusted operating margin of 13.8% contracted 70 bps year over year. The decline in the operating margin mainly resulted from higher SG&A expenses as a percentage of sales.HD’s Other Financial UpdatesHome Depot ended third-quarter fiscal 2024 with cash and cash equivalents of $1.5 billion, a long-term debt (excluding current installments) of $50.1 billion, and shareholders' equity of $5.8 billion. In the first nine months of fiscal 2024, the company generated $15.1 billion of net cash from operations.What HD Plans for Fiscal 2024?Management has raised its sales and earnings per share view for fiscal 2024, driven by the year-to-date performance and the inclusion of SRS results. The company notes that its fiscal 2024 will include an additional 53rd week. Home Depot anticipates sales to increase 4% year over year for fiscal 2024 compared with 2.5-3.5% growth expected earlier. The company’s sales guidance includes a $2.3 billion sales contribution from the 53rd week and $6.4 billion in incremental sales from SRS.Home Depot expects comparable sales to decline 2.5% for the 52 weeks compared with the prior mentioned 3-4% decline. HD estimates the gross margin for fiscal 2024 to be 33.5%, with an operating margin of 13.5% (compared with the previously stated 13.5-13.6%). It expects an adjusted operating margin of 13.8%.The company expects an effective tax rate of 24% for fiscal 2024. Net interest expenses are likely to be $2.1 billion for fiscal 2024 versus the $2.2 billion mentioned earlier. HD plans to open 12 stores for fiscal 2024.Home Depot anticipates GAAP earnings per share to decline 2% year over year for fiscal 2024 compared with the prior stated 2-4% decline. HD expects adjusted earnings per share to fall 1% year over year versus the 1-3% decline mentioned earlier. The company anticipates the 53rd week to contribute 30 cents per share to earnings in fiscal 2024.How Have Estimates Been Moving Since Then?It turns out, estimates revision flatlined during the past month.VGM ScoresCurrently, Home Depot has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookHome Depot has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report The Home Depot, Inc. 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