Source: PaxForex Premium Analytics Portal, Fundamental Insight
Home Depot will release its fourth-quarter fiscal year 2021 earnings results on Feb. 22. As we all may have noticed, it's doing fine with the growing demand for home goods.
The masses, accustomed to spending most of their time at home, are taking on projects to make that time more enjoyable and productive. Shareholders feared that as the economy recovered, this might cause a sharp turnaround in Home Depot sales. So far, that hasn't happened. Nevertheless, investors will be watching closely for consumer trends and management expectations for 2022, when Home Depot reports fourth-quarter earnings.
In the third and final quarter ended in October, Home Depot reported a sales growth of 9.8%. That's impressive considering that growth was 23% in the same period last year. Even restrained growth in 2021 exceeds Home Depot's compound annual growth rate of 6.9% over the previous decade. Several macroeconomic factors continue to work in Home Depot's favor, including rising home prices, widespread remote work, and a limited inventory of homes for sale.
Remote work is not a new phenomenon; a small percentage of people were working from home even before the pandemic. However, the pandemic gave momentum to this trend. Initially, it was a temporary change to help slow the spread of COVID-19. Most workers viewed the switch favorably because it spared them from having to commute to work, saving time and expense. Employers were surprised at how productive organizations were working remotely, and many decided to extend the option for the long term. How does this work in Home Depot's favor?
People who work from home usually need a separate office and associated furniture. Some people have a ready-made space that they can remodel. Others have to build an addition to their home to accommodate a workspace. Of course, some of these buyers have found the right solution for them at Home Depot, the largest home improvement retailer in the United States. It remains to be seen how widespread remote work will be after the coronavirus pandemic. One thing is certain, it will be at a higher level than it was before the disease. Moreover, hundreds of thousands of people in the U.S. test positive for COVID-19 every day, so the end of the pandemic seems a long way off.
These and other factors could mean another strong year for Home Depot in 2022. Rival Lowe's is already predicting that sales will remain strong, though down slightly in the new year. When Home Depot reports Q4 earnings, investors will want to see what customer demand will be like in 2022.
Wall Street analysts expect Home Depot to report revenue of $34.8 billion and earnings per share (EPS) of $3.18. If the company lives up to those projections, that would mean growth of 7.90% and 20%, respectively, over the same period last year.
Despite expectations for strong sales and earnings growth in Q4, Home Depot stock is down 14% in 2022. Perhaps the market expects the favorable macroeconomic factors that have supported Home Depot's sales and earnings to change in the near term. Whether or not that scenario will come true remains to be seen. In the meantime, Home Depot continues to post solid quarter-over-quarter growth.
As long as the price is above 342.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 363.90
- Take Profit 1: 382.00
- Take Profit 2: 392.00
Alternative scenario:
If the level of 330.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 342.00
- Take Profit 1: 326.00
- Take Profit 2: 317.00
