HSBC Analyst Lowers Price Target on Home Depot After Worst Revenue Miss

HSBC's Daniela Bretthauer lowered their price target on Home Depot (NYSE: HD) by 1.5% from $323 to $318 on 2024/05/15. The analyst maintained their Sell rating on the stock.

According to Bretthauer, the decision to cut the price target was driven by Home Depot's disappointing Q1 2024 earnings report, which revealed the company's "worst revenue miss in nearly two decades, coming two years after the pulling forward of sales during the pandemic." The analyst also attributed their reiterated Sell rating to "muted housing market dynamics."

Home Depot's Q1 2024 earnings report showed mixed results. The company reported earnings per share (EPS) of $3.63, slightly surpassing the Zacks Consensus Estimate of $3.61. However, this figure represented a 5% decline compared to Q1 2023's EPS of $3.82. On the revenue front, Home Depot fell short of expectations, reporting $36.4 billion, which missed the Zacks Consensus Estimate of $36.65 billion and was 2.3% lower than Q1 2023's revenue of $37.26 billion.

Despite the revenue miss, Home Depot did manage to increase its gross margin by 40 basis points year-over-year, reaching 34.1%. However, the operating margin experienced a decline of 100 basis points, settling at 13.9%.

Looking ahead, Home Depot's management provided guidance for FY 2024, taking into account a 53rd week. They expect EPS to increase by 1% year-over-year, with $0.30 attributed to the additional week. Revenue is also projected to grow by 1% year-over-year, including $2.3 billion from the 53rd week. Comparable sales are anticipated to decline by 1% over the 52-week period. The company expects a gross margin of 33.9% and an operating margin of 14.1%. Additionally, Home Depot plans to open 12 new stores.

Despite the negative outlook from HSBC's Bretthauer, other analysts have also adjusted their ratings and price targets for Home Depot following the earnings report. Greg Melich of Evercore ISI Group lowered their price target by 7.1% from $420 to $390 but maintained a Buy rating on the stock. TD Cowen's Max Rakhlenko also reduced their price target, albeit by a smaller margin of 4.5% from $440 to $420, while maintaining a Strong Buy rating. Scot Ciccarelli of Truist Securities lowered their price target by 2.6% from $417 to $406 and maintained a Strong Buy rating.

When considering the overall analyst sentiment towards Home Depot, 70% of top-rated analysts view the stock as either a Strong Buy or Buy, while 30% consider it a Hold. Notably, no analysts recommend or strongly recommend selling the stock.

The consensus forecast among analysts suggests that Home Depot's upcoming year will yield earnings per share (EPS) of $15.88, representing a 4.7% increase on a year-over-year basis.

In terms of stock performance, Home Depot's share price has seen a 2.4% increase since the release of its latest quarterly report on May 14, 2024. Year-over-year, the stock has grown by 20.8%. However, it's worth noting that Home Depot has trailed behind the S&P 500, which has experienced a 28.3% increase over the same period.

HSBC analyst Daniela Bretthauer, who downgraded Home Depot's rating, is ranked in the bottom 29% of Wall Street analysts according to WallStreetZen. With an average return of -0.6% and a win rate of 50%, Bretthauer specializes in the Healthcare, Consumer Cyclical, and Consumer Defensive sectors.

Home Depot, Inc. is a well-known home improvement retailer operating 2,300 stores across the United States, Canada, and Mexico. The company offers a wide range of building materials, home improvement products, lawn and garden products, and decor items. Home Depot also provides installation services for home improvement projects and offers tool and equipment rentals. Established in 1978, the company is headquartered in Atlanta, Georgia.

Want to get in touch? Email us at news@wallstreetzen.com.

WallStreetZen and Don Francis do not hold any positions in the companies mentioned in this article. The information and statistics provided herein are presented for general informational purposes only and may not be accurate, complete, or up-to-date. It should not be interpreted as a recommendation to buy or sell any stocks and should not be solely relied upon for making investment decisions. It does not take into account your financial situation or risk profile. All investors should conduct their own investment due diligence before buying a stock. WallStreetZen expressly disclaims any liability for the accuracy, reliability, or completeness of the analysts' information, price targets, ratings, or opinions.