Home Depot Stock Rises Despite New Class Action Lawsuit

Home Depot's stock rose 2% despite a class action lawsuit alleging the company forced customers to pay for optional damage protection fees as part of its tool rental service, resulting in "tens of millions of dollars each year" in revenue. Analysts are optimistic about the company's earnings report next week, with a Strong Buy consensus rating and an average price target of $429.89 per share, implying 6.233% upside potential.

Home Depot's (HD) stock rose by 2% despite a class action lawsuit alleging the company forces customers to pay for optional damage protection fees as part of its tool rental service. The lawsuit, filed in Georgia federal court, claims that Home Depot's employees and computer system automatically add these fees to customers' bills, generating "tens of millions of dollars each year" in revenue [1].

The lawsuit, filed by plaintiff Randall Simmons, argues that Home Depot's practice of forcibly placing the damage protection fee on customers' bills breaches its contract. Simmons seeks to represent a nationwide class and Georgia subclass of consumers who rented tools under a form contract substantially similar to his and were charged a damage protection fee without expressly opting in or selecting the service. The plaintiff claims Home Depot is guilty of breach of contract and in violation of the Class Action Fairness Act [1].

Despite the ongoing lawsuit, analysts remain optimistic about Home Depot's earnings report expected to be released on August 19. The company is expected to post quarterly earnings of $4.71 per share, representing a year-over-year change of +0.9%. Revenues are expected to be $45.51 billion, up 5.4% from the year-ago quarter [2]. The consensus EPS estimate has been revised 0.03% lower over the last 30 days, reflecting analysts' reassessment of the company's earnings prospects [2].

The Most Accurate Estimate for Home Depot's earnings is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +0.34%. This suggests that analysts have recently become bullish on the company's earnings prospects. The stock currently carries a Zacks Rank of #3, indicating that Home Depot is likely to beat the consensus EPS estimate [2].

Home Depot's earnings surprise history shows that the company has beaten consensus EPS estimates three times over the last four quarters. This positive track record adds to the optimism surrounding the company's upcoming earnings report [2].

While the class action lawsuit and other potential legal issues could pose risks to Home Depot's operations and reputation, the company's strong earnings outlook and positive analyst sentiment suggest that investors may view these challenges as manageable. However, investors should remain vigilant and monitor the situation as the lawsuit progresses and the earnings report approaches.

References:
[1] https://topclassactions.com/lawsuit-settlements/lawsuit-news/home-depot-class-action-alleges-company-forces-customers-to-pay-for-damage-protection/
[2] https://finance.yahoo.com/news/home-depot-hd-earnings-expected-140002722.html