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Predrag V

Home Depot

Question

Why did the Home Depot stock hit record highs when almost all stocks trade lower as a result of the COVID-19 pandemic?


 

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Hi Predrag, thanks for coming here.

The reason why shares of Home Depot hit record highs in the past few days is better-than-expected quarterly earnings. The retailer said its same-store sales grew 6.4% in the first quarter while revenue jumped 7.1%. However, the earnings came in below the expectations due to higher costs related to the coronavirus pandemic. 

Home Depot also said that the average ticket increased 11% on the rush buying in supermarkets at the beginning of the coronavirus pandemic. Although its physical stores suffered, Home Depot reported an increase of 79% in online sales compared to the same period last year.

“As shelter-in-place orders rolled out across the country in mid- to late-March, we saw our digital businesses accelerate from approximately 30% growth in early March to triple digit growth in early April. During the last three weeks of the quarter, traffic to HomeDepot.com was consistently above Black Friday levels,” the executive vice president of merchandising Ted Decker said. 

Hence, this is the reason why Home Depot stock hit record highs. Almost all stocks of companies active in the e-commerce sector soared higher on the expectation of a rise in demand during the pandemic lockdown measures.


 

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Hi Predrag,

Home Depot has been on a roll with its shares recently touching $248.32. This is more than 71% in gains after its $140.63 March rock-bottom. With COVID-19 flooring most businesses, the retailer attributes its success to employee well-being.
To begin with, it has increased personal time off for not only hourly workers but also non-hourly employees most prone to Coronavirus. This together with weekly bonuses and double overtimes has kept workers coming. The incentives have cost the store over $640 million which translates to roughly 60 cents per share.
In a past statement, boss Craig Menear mentioned the organization’s commitment towards supplying essential commodities without risking their customers’ health.  According to Menear, controlling shopper traffic has impacted sales in various markets.
Merchandising EVC Ted Decker also noted a rise in online purchases from March’s 30% to triple digits in April. Best of all, the outlets remain open in most states because of HD’s status as an essential retailer.
 

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Hello Predrag,

Home Depot stock held up quite well this year in spite of coronavirus pandemic. Net sales for Q1 climbed by 7.1% in the period between February 3 and May 3. This shows that the pandemic affected roughly half of the quarter.  As a result, investors were buying the stock sending its shares up nearly 15% in the first half of 2020, outperforming S&P 500 and Lowe's.

However, market analysts estimated the company’s earnings to drop around 1.6% this year. On the other hand, the declining profits have sent the company’s P/E ratio to 25. 

Still, analysts expect a better next year for Home Depot, estimating 10.6% profit growth which would help recover the majority of this year’s losses. 

Home Depot currently has around $8.7 billion in cash. Given that the company’s remaining cash flow stayed positive, investors should expect the stock to stay stable. 
 

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Hey,

Unlike other companies, Home Depot’s stock stood strong during the pandemic as it was considered an essential business. A lot of people used the time in quarantine to renovate their homes and frequently contacted Home Depot to purchase supplies and make upgrades. 

In the first quarter, Home Depot’s net sales surged by 7.1%, while diluted earnings per share declined by 8.4% because of increased expenses related to the health crisis. Home Depot paid a pre-tax charge of $850 million pre-tax charges, causing its earnings to decline by $0.60 per diluted share.

It is expected that Home Depot will continue to remain strong amid all the uncertainty, mostly because of its efforts merging physical-store shopping with online shopping as a part of the project called One Home Depot. Even though the crisis accelerated some of the implementations, the home improvement company had the program ready earlier.

Shares of Home Depot jumped 39% over the past three months, and some predict that the stock will continue moving up.
 

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