Buy Home Depot (HD) Stock Before Q1 Earnings After Strong Walmart Performance?

Shares of Home Depot HD have underperformed its industry’s average in 2019. With that said, Walmart WMT posted its strongest Q1 comps growth in nine years on Wednesday. So, let’s see if investors should think about buying Home Depot stock before it reports its first-quarter 2019 financial results on Tuesday, May 21.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Overview” data-reactid=”12″>Overview

Home Depot is coming off mixed Q4 2018 earnings results. Despite a small top-line miss, the firm’s fourth-quarter revenue surged 10.9%. Meanwhile, the home improvement giant beat quarterly earnings estimate once again and saw its adjusted EPS figure soar nearly 50% from Q4 2017.

Last quarter, management said they expected roughly 5% comparable sales growth for the full year 2019. This would come on top of 2018’s 5.2% comps growth. CEO Craig Menear said at the time, “our view on the health of the economy and the consumer, as well as the momentum of our strategic investments” supported Home Depot’s comps guidance.

Since then, there have been some worries that the U.S. and global economies are slowing. The recently revved up trade battle between the U.S. and China has made some even more concerned. And U.S. retail sales dipped 0.2% in April from a month prior.

Yet, retail sales—a measure of purchases at stores, restaurants, and online—popped 3.1% from April 2018. Unemployment also currently rests near 50-year lows and Walmart just posted impressive Q1 comps and e-commerce growth as it tries to fight off Amazon AMZN (also read: Buy Walmart Stock After Q1 Earnings on Delivery & E-commerce Strength?).

Shares of Home Depot closed regular trading Thursday up marginally at $192.38 per share. This marked a roughly 10.5% downturn compared to HD’s 52-week intraday trading high of $215.43, which could give shares room to run if the firm is able to impress Wall Street. Jumping back a bit further, we can see that Home Depot has easily topped its industry’s average climb and outpaced rival Lowe’s LOW.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Q1 Outlook &amp; Earnings Trends” data-reactid=”28″>Q1 Outlook & Earnings Trends

Looking ahead, our current Zacks Consensus Estimate calls for Home Depot’s first-quarter revenue to pop 5.5% to reach $26.33 billion. This would come in below last quarter’s strong 11% top-line growth. Home Depot’s full-year fiscal 2019 revenue is projected to climb 2.9% to reach $111.29 billion, which would fall short of 2018’s 7.2% revenue growth.

At the bottom end of the income statement, Home Depot’s adjusted quarterly earnings are expected to climb 4.81% to reach $2.18 per share. Last quarter, adjusted earnings soared roughly 50%. Peeking further ahead, the company’s full-year earnings are projected to climb 1.9%.

Investors should also note that Home Depot has seen its earnings estimate revision activity trend heavily in the wrong direction for Q1, as well as fiscal 2019 and 2020. This means most analysts are less optimistic about the company’s bottom-line growth than they were before the quarter got underway.

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