Will Home Depot (HD.US) see its comparable sales decline for the eighth consecutive quarter?

Home Depot (HD.US) will report its fiscal 2024 third-quarter earnings before the market opens on Tuesday, November 12. Wall Street analysts expect Home Depot's Q3 revenue to rise 3.8% YoY to $39.13 billion, and adjusted EPS to decline 4.5% YoY to $3.64.

Home Depot's second-quarter earnings released in August showed revenue rose slightly YoY to $43.18 billion; comparable sales fell 3.3%, more than the 2.1% expected by analysts, marking its seventh consecutive quarter of negative comparable sales.

During the second-quarter earnings call, Home Depot executives explained that sales in the second half of the year would be below expectations due to high interest rates and uncertainty in consumer spending, and the company still maintains a cautious stance. It expects full-year comparable sales to decline 3% to 4% in fiscal 2025. However, the recent acquisition of SRS Distribution, a company that sells supplies to professionals in landscaping, roofing, or pool businesses, is expected to boost Home Depot's annual total sales.

Notably, Home Depot has a stable customer base compared to other retailers. About half of its sales come from professionals, and the rest from individual households.

Moreover, Home Depot's management's view on the real estate market is worth watching. The continued rise in long-term U.S. bond yields has pushed mortgage rates higher, offsetting the increase in sales of building and remodeling products due to the strengthening real estate market. In addition, insurance claims and homeowners seeking to rebuild after two hurricanes may have boosted Home Depot's sales, which may have a greater impact on its third-quarter earnings.

Home Depot may see a boost in demand next year due to the possibility of multiple rate cuts. Analysts expect Home Depot's sales to rise 3% YoY to $157 billion in fiscal 2025; sales to rise 3.8% YoY to $162 billion in fiscal 2026. Meanwhile, its adjusted EPS is expected to rise from $15.11 in fiscal 2024 to $15.63 in fiscal 2026.

Among the 35 analysts covering Home Depot, 25 recommend "strong buy," 1 recommends "moderate buy," and 9 recommend "hold." The average target price is $412.69, with about 2% upside from Friday's closing price.