Home Depot (NYSE:HD) posted its Q2 fiscal results on Tuesday, beating analyst expectations and boosting HD stock 4.4%.
A Mixed Bag
The company’s results were somewhat of a mixed bag. The home improvement giant reported net income of $3.5 billion USD, or $3.17 USD a share, compared to $3.5 billion USD, or $3.05 USD a share, for the same period last year. Analysts polled by FactSet had been expecting earnings of $3.09 a share. However, net sales of $30.8 billion USD fell short of the predicted figure of $31.022 billion USD, which the company attributes to significantly declining lumber prices as well as a wetter than expected summer, impacting home improvement activity.
“We are encouraged by the momentum we are seeing from our strategic investments and believe that the current health of the U.S. consumer and a stable housing environment continue to support our business […] That being said, lumber prices have declined significantly compared to last year, which impacts our sales growth. As a result, today we are updating our sales guidance to account primarily for continued lumber price deflation, as well as potential impacts to the U.S. consumer arising from recently announced tariffs,” said Craig Menear, CEO.
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HD Stock Outperforming the Market
HD stock has had a somewhat tumultuous year, partly due to geopolitical tensions influencing Wall Street’s confidence, yet the company’s shares are up over 28% this year as Home Depot has been outperforming the wider market. This could be attributed to the fact that about 70% of the company’s goods are domestically sourced, which provides the company with an extra layer of defense against an impending rise in tariffs, and makes HD stock an even more attractive buy.
Today’s results have helped HD stock regain the market lead from its nearest competitor, Lowe’s (NYSE:LOW), which had the lead for most of the first half of 2019 following investor bullishness regarding its strategic turnaround efforts and management reshuffle. Last year, Lowe’s announced the closure of 51 stores across the US and Canada.
HD stock currently holds a “buy” rating from nearly two-thirds of analysts as the company looks set for a strong close to 2019.
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