* Reports Q1 2019 results on Tuesday, May 21, before the market is open
* Forecast: $ 26.37 billion
* Expected: $ 2.18
Home Depot, Inc. (NYSE 🙂 is not expected to report promising results tomorrow. The largest US home improvement retailer is publishing revenues tomorrow between signs of a slowdown in the housing market and a spring season too wet for Americans to buy their garden items.
If these two factors negatively impact Home Depot's profit, this will prolong the weakness that began at the end of 2018. The company reported that comparable sales increased 3.2% in the fiscal fourth quarter that ended late February, far less than the 4.5% earnings analysts had expected. That mistake came after the company experienced one of the strongest expansions in its history, resulting in a comparable revenue growth of 30 consecutive quarters on an annual basis.
Together with a soft housing market, mother nature Home Depot does not help much. In much of the Great Plains, Midwest and Northeast, the first green outbreak of spring was about a week to 10 days late, the US National Phenology Network said on April 30. That means that the sale of Home Depot is related to the garden season, the equivalent of Christmas, may not show much growth in the first quarter. Spring is the season in which many buyers buy gardening items and renovate their homes, making it an important quarter for retailers in the home industry. Home Depot & # 39; s Q1 ends on April 29.
Short-term decline
But apart from these setbacks in the short term, there is little to suggest that the booming period for the retailer is over. The latest economic developments, particularly in the housing market, indicate that the housing weakness that started in September last year is not getting any deeper.
U.S. Pat. new construction construction rose for a second month and topped in April in a sign of a positive momentum for the sector at the start of the second quarter. To counter a possible blow from the US-China trade war, the Fed has moved to the sidelines, stabilizing mortgage rates.
Consumer spending, on the other hand, is still solid, such as Walmart Inc. (NYSE: NYSE 🙂 last week. & # 39; The world's largest retailer reported its strongest sales growth in Q1 in nine years.
Helped by this economic strength, the Home Depot shares have withstood the current malaise on the market, with more than 12% this year, to close the Friday session at $ 192.58. The other catalysts that also stimulate the company's upward trajectory are the attractive dividends and the massive buy-back plan to support the shares if they are undervalued.
Bottom Line
An improving US housing market and strong consumer spending should continue to boost the share price of Home Depot this year, despite some setbacks at the start of the year. Any weak post-profit should offer good buying opportunities for investors looking for a smart entry point. The retailer is a good candidate for buying and holding, even due to the threat to the economy from the escalation of the trade war between the US and China. The quarterly dividend has increased by 500% over the past decade and with a healthy payout ratio of 42% it has much more room to grow.
