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Will Home Depot Come in for a Soft Landing in 2022?

Home Depot (NYSE: HD) is scheduled to report fiscal 2022 first-quarter earnings before the markets open on Tuesday, May 17. Since the pandemic’s onset, the home improvement retailer has had an incredible run. Revenue and profits surged as consumers took to home improvement projects while spending more time at home.
The trend may have peaked, and Home Depot is expecting an end to revenue growth in 2022. With expectations lowered significantly, investors will be looking for Home Depot to perhaps report better-than-expected sales in the first quarter. 
Image source: Getty Images.

Expecting a pause in revenue growth this year
In its most recent quarter, which ended on Jan. 30, Home Depot reported sales of $35.7 billion. That was a 10.7% increase from the same quarter the prior year. Folks have splurged on home improvement since the pandemic’s onset. Working, learning, exercising, and entertaining more at home, people needed to update their homes to accommodate the lifestyle change.

HD Revenue (Quarterly YoY Growth) data by YCharts.
“Fiscal 2021 was another record year for The Home Depot. We achieved a milestone of over $150 billion in sales,” said Craig Menear, chairman and CEO. “Our ability to grow the business by over $40 billion in the last two years is a testament to investments we have made in the business, our ability to execute with agility, and our associates’ relentless focus on our customers.”
Indeed, fulfilling the surge in customer demand was no easy feat, and management can be given credit for stepping up to the challenge. That said, as economic reopening gains momentum in 2022 and is already at elevated levels, Home Depot expects flat revenue growth for 2022. Still, Home Depot is optimistic it can expand earnings per share in the low single digits for the year, despite flat revenue growth.
Of course, investors were not happy with the modest expectations for 2022. As a result, Home Depot’s stock is down nearly 30% off its highs in late 2021.
What this could mean for Home Depot investors
Analysts on Wall Street expect Home Depot to report revenue of $36.36 billion and earnings per share (EPS) of $3.62 in Q1. If the company meets those projections, it will represent decreases of 3.04% and 6.22%, respectively, from the same period the year before.

HD EPS Diluted (TTM) data by YCharts.
Note that expectations from Wall Street are below trend for what Home Depot management has forecast for 2022. Therefore, shareholders might be relieved if Home Depot is not forced to lower targets for the year. However, if management does lower targets for 2022 and the stock falls considerably on the news, it could be a buying opportunity for long-term investors.
Home Depot has done an excellent job growing revenue and earnings over the long run. Undoubtedly, the near term will be volatile as consumer behavior evolves through economic reopening. Still, investors can reasonably assume Home Depot will settle into a nice groove once economies reach a new equilibrium.

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy. –

Home Depot (NYSE: HD) is scheduled to report fiscal 2022 first-quarter earnings before the markets open on Tuesday, May 17. Since the pandemic’s onset, the home improvement retailer has had an incredible run. Revenue and profits surged as consumers took to home improvement projects while spending more time at home.

The trend may have peaked, and Home Depot is expecting an end to revenue growth in 2022. With expectations lowered significantly, investors will be looking for Home Depot to perhaps report better-than-expected sales in the first quarter. 

Image source: Getty Images.

Expecting a pause in revenue growth this year

In its most recent quarter, which ended on Jan. 30, Home Depot reported sales of $35.7 billion. That was a 10.7% increase from the same quarter the prior year. Folks have splurged on home improvement since the pandemic’s onset. Working, learning, exercising, and entertaining more at home, people needed to update their homes to accommodate the lifestyle change.

HD Revenue (Quarterly YoY Growth) data by YCharts.

“Fiscal 2021 was another record year for The Home Depot. We achieved a milestone of over $150 billion in sales,” said Craig Menear, chairman and CEO. “Our ability to grow the business by over $40 billion in the last two years is a testament to investments we have made in the business, our ability to execute with agility, and our associates’ relentless focus on our customers.”

Indeed, fulfilling the surge in customer demand was no easy feat, and management can be given credit for stepping up to the challenge. That said, as economic reopening gains momentum in 2022 and is already at elevated levels, Home Depot expects flat revenue growth for 2022. Still, Home Depot is optimistic it can expand earnings per share in the low single digits for the year, despite flat revenue growth.

Of course, investors were not happy with the modest expectations for 2022. As a result, Home Depot’s stock is down nearly 30% off its highs in late 2021.

What this could mean for Home Depot investors

Analysts on Wall Street expect Home Depot to report revenue of $36.36 billion and earnings per share (EPS) of $3.62 in Q1. If the company meets those projections, it will represent decreases of 3.04% and 6.22%, respectively, from the same period the year before.

HD EPS Diluted (TTM) data by YCharts.

Note that expectations from Wall Street are below trend for what Home Depot management has forecast for 2022. Therefore, shareholders might be relieved if Home Depot is not forced to lower targets for the year. However, if management does lower targets for 2022 and the stock falls considerably on the news, it could be a buying opportunity for long-term investors.

Home Depot has done an excellent job growing revenue and earnings over the long run. Undoubtedly, the near term will be volatile as consumer behavior evolves through economic reopening. Still, investors can reasonably assume Home Depot will settle into a nice groove once economies reach a new equilibrium.

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.

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