Home Depot Underwhelms Wall Street Even As It Overachieves In First Quarter Earnings

Business slanted up, but the stock price went in the opposite direction. What gives? (Photo by Smith Collection/Gado/Getty Images) Gado via Getty Images

Home Depot HD did virtually everything right in its first quarter: revenue, earnings and comp store numbers all blew past analyst forecasts as the big home improvement chain reported its finances this morning.

Wall Street was not impressed. The stock was in the red as of mid-day, down a little less than 1% and off about 10 percent from its 52-week high even as it remains significantly ahead of its year-ago price.

Here’s all Home Depot has done over the past 90 days:

        • Revenue up 32.9% to $37.5 billion, topping analyst estimates of $34.6 billion. U.S. sales were up 29.9%, also beating predictions.

        • Earnings up 85.6% to $3.86 per share, again well ahead of forecasts of $3.06 a share.

        • Same store sales exploded an astonishing 31.1% from last year, up over a forecast of 19.9%. This comes against a year-ago quarter that while hit by the start of the pandemic was still one in which all Depot stores were open.

        • The number of transactions was up 19.3% and the average ticket increased 10.3%, both impressive numbers as the company talked about the “unprecedented” demand for materials for building and home improvement projects.

And here’s what Wall Street said:

        • The stock is too high priced and its runup this year already reflects these expected increases. “Overextending” is how one source put it.

        • The housing market, while robust, is still beset by serious shortages in inventory and could slow down later in the year due to lack of homes available for sale.

        • Lumber prices continue to skyrocket and at some point both builders and do-it-yourselfers will start to slow down their purchasing based on these higher costs.

        • And, besides, arch-retail-rival Lowe’s LOW is a better stock right now and we’re waiting to see its earnings tomorrow before we make any comparisons on which stock to buy.

That this has to be frustrating for Home Depot is beyond obvious. “Fiscal 2021 is off to a strong start,” CEO Craig Menear said in announcing the financial results. “We continue to build on the momentum from our strategic investments and effectively manage the unprecedented demand for home improvement projects.”

But perhaps all is not lost. One analyst, Bank of America’s BAC Elizabeth Suzuki, was quoted as saying, “We remain encouraged on the medium-term outlook for HD as the dominant retailer in a strong category of retail. We reiterate our buy rating on HD.”

But, at least today, much of the rest of Wall Street wasn’t listening.