The Home Depot, Inc. Beat Revenue Forecasts By 5.2%: Here's What Analysts Are Forecasting Next

By
Simply Wall St
Published
November 19, 2020
NYSE:HD

As you might know, The Home Depot, Inc. (NYSE:HD) just kicked off its latest quarterly results with some very strong numbers. The company beat expectations with revenues of US$34b arriving 5.2% ahead of forecasts. Statutory earnings per share (EPS) were US$3.18, 4.3% ahead of estimates. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for Home Depot

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NYSE:HD Earnings and Revenue Growth November 19th 2020

Following last week's earnings report, Home Depot's 30 analysts are forecasting 2022 revenues to be US$127.1b, approximately in line with the last 12 months. Statutory earnings per share are predicted to increase 4.0% to US$12.06. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$125.8b and earnings per share (EPS) of US$12.05 in 2022. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$306. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Home Depot, with the most bullish analyst valuing it at US$350 and the most bearish at US$200 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Home Depot shareholders.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that Home Depot's revenue growth will slow down substantially, with revenues next year expected to grow 1.2%, compared to a historical growth rate of 6.3% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 9.8% per year. Factoring in the forecast slowdown in growth, it seems obvious that Home Depot is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Home Depot's revenues are expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Home Depot. Long-term earnings power is much more important than next year's profits. We have forecasts for Home Depot going out to 2025, and you can see them free on our platform here.

Plus, you should also learn about the 2 warning signs we've spotted with Home Depot .

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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