November 27, 2022

Table of Contents

What happened

Shares of Home Depot (NYSE: HD) were up as high as 6% in early trading on Tuesday, after the company reported better-than-expected earnings results for its fiscal first quarter ended May 1.

After giving back some of those gains, the stock was up 0.65% as of 10:19 a.m. ET. Year to date, it’s down 28.6%, which underperforms the S&P 500‘s slide of 14.7% over the same period.

HD data by YCharts

So what

For the fiscal first quarter, Home Depot reported revenue of $38.9 billion, or growth of 3.8% year over year. This translated to earnings per share of $4.09, up from $3.86 in the year-ago quarter, and beat the consensus analyst estimate of $3.69. “Fiscal 2022 is off to a strong start as we delivered the highest first quarter sales in Company history,” CEO Ted Decker said in the earnings release.

Investors were impressed that the company posted year-over-year improvement in revenue and profits, since it was up against a difficult comparison. In the same quarter a year ago, revenue boomed 33% year over year, representing an acceleration over the growth rates through the pandemic in 2020. As the pandemic caused people to spend more time at home, spending on home improvment went through the roof, and Home Depot benefited.

Even after the year-to-date decline, the company has still delivered an 86% return to shareholders over the past five years, which outperforms the S&P 500’s return of 69% over the same period.

A person lifting a wooden plank off the shelf at a home-improvement store.

Image source: Getty Images.

Now what

The quarter might help ease investor fears that higher inflation and supply chain issues are not keeping the consumer from getting out and spending money, at least in certain markets like home improvement. The sell-off has brought the stock’s valuation down to an attractive 18.4 times expected earnings for fiscal 2022. Home Depot also pays an above-average dividend yield of 2.3%.

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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

https://www.nasdaq.com/articles/why-home-depot-stock-was-trading-higher-today