Unlock Your Wealthier Future Today
We've been selecting winning stocks for 10 years. Get your investing life on the fast track now with our completely free, high-performing stock.
Home Depot Stock Is Down After Its Q4 Earnings
Home Depot shares fell more than 8% yesterday, joining in as markets panicked -- but was it just current conditions or something else?
Feb. 23, 2022

Home Depot (NYSE: HD) shares initially popped on its earnings report and the company even raised its dividend. A day later, it tanked 8%. So what actually happened?

Home Depot's Q4 earnings results

Q4 revenue came in at $35.72 billion v.s. an estimated $34.88 billion, which was equivalent to a healthy 10.7% increase year-over-year (YoY). Net earnings grew 17% from the same period last year to $3.35 billion. It also named a new CEO, Ted Decker, who will take the lead from March 1, as he leaves his Chief Operating Officer position at the company behind.

Another key point when it comes down to current earnings reports is guidance. While Home Depot might struggle to match the blockbuster year for sales that was 2021, the company has guided for slightly positive sales growth. There was also a 15% increase in the company's dividend, meaning, for every single Home Depot share you hold now, you're pocketing $7.60 every year.

Why did Home Depot stock fall?

Naturally, a company like Home Depot could almost be considered a "forgotten" stay-at-home stock, but it was a clear beneficiary as savings stacked up, and consumers decided it was time for an upgrade around the house. There were the other obvious culprits, Zoom, Docusign, Netflix -- but Home Depot got a pass -- maybe investors just have a little more respect for the value-oriented predictable business models.

Now that uncertainty surrounds markets, the tide appears to have changed. Home Depot's being criticized for lower margins, and the main bump in revenue growth is coming from raised prices -- customer transactions actually declined 3.4% YoY to illustrate. A reasonable response, however, considering furniture, appliances, and housing costs are among the hardest hit by inflation. Raised prices are a natural response, and all-in-all, a necessary precaution management must take.

What are the long-term prospects for Home Depot?

Home improvement spending was $457 billion in 2020. Home improvement spending was estimated to grow 15% as we entered 2021 too, that's thousands -- if not tens of thousands -- each household was spending on home renovations. No wonder housing prices have been on the rise. It may not stop there either, as forecasts see home improvement spending steadily rising through 2025, where an estimated $621 billion will be spent on the segment.

My point is, Home Depot is rock solid.

Now, turbulent market times are taking a foothold as of late, and we don't have a crystal ball to predict how things will fizzle out. But, what's very unlikely, is seeing a major decline in Home Depot's business model. It has a 1.9% dividend for a reason, it's a staple, it's reliable, and there will always be a need for its wares, even in a diabolical bear market or recessionary times. Notice too, Home Depot never slashed its dividend when tough times came knocking -- this is the company's 140th consecutive quarter that it has paid a cash dividend. It's been considered a safety stock to many for the longest time, and that's unlikely to change any time soon.



The Home of Successful Investing.

© 2024 MyWallSt Ltd. All rights reserved.


Services

Content

Social

Company

Support

Resources


This website is operated by MyWallSt Ltd (“MyWallSt”). MyWallSt is a publisher and a technology platform, not a registered broker-dealer or registered investment adviser, and does not provide investment advice. All information provided by MyWallSt Limited is of a general nature for information and education purposes, and you should not construe any such information as investment advice. MyWallSt Limited does not take your specific needs, investment objectives or financial situation into consideration, and any investments mentioned may not be suitable for you. You should always carry out your own independent verification of facts and data before making any investment decisions, as we cannot guarantee the accuracy or completeness of any information we publish and any opinions that we publish may be wrong and may change at any time without notice. If you are unsure of any investment decision you should seek a professional financial advisor. MyWallSt Limited is not a registered investment adviser and we do not provide regulated investment advice or recommendations. MyWallSt Limited is not regulated by the Central Bank of Ireland. MyWallSt Limited may provide hyperlinks to web sites operated by third parties. Your use of third party web sites and content, including without limitation, your use of any information, data, advertising, products, or other materials on or available through such web sites, is at your own risk and is subject to the third parties' terms of use.