What Home Depot’s earnings mean for the housing market outlook

Home Depot raised its budget outlook after strong sales in the third quarter of 2024, driven by demand for seasonal goods and hurricane preparedness in the Southeast.

The world’s largest home improvement retailer and the fourth largest U.S. retailer by market capitalization reported revenues of $40.2 billion for the quarter ended October 27. That exceeded analyst expectations of $39.31 billion. Revenue rose 6.6% from the third quarter of 2023, despite a decline in major renovation projects attributed to higher interest rates and economic uncertainty.

Comparable sales fell 1.3% over the year, including a 1.2% decline in the US – a smaller decline than the expected 3.1%.

“While macroeconomic uncertainty remains, our third quarter performance exceeded our expectations,” Ted Decker, chairman, president and CEO of Home Depot, said in a statement. “As the weather normalized, we saw better engagement with seasonal products and certain outdoor projects, as well as an increase in sales related to hurricane demand.”

In the company’s earnings call on Tuesday morning, Decker shared that while some consumer spending remains resilient out of necessity, it also underlines the variability and potential unpredictability of sales driven by seasonal trends and extreme weather.

“From a geographic perspective, storms and more favorable weather during the quarter drove a greater degree of variability in performance across our divisions, and four of our 19 US regions delivered positive results. [comparable sales]” he said.

While homeowners may be less inclined to take on extensive remodeling projects or take on additional debt because of higher interest rates, they are still investing in necessary maintenance and upgrades — especially seasonally, Decker said during the earnings call.

“As the weather normalized, we saw better engagement on seasonal commodities and certain outdoor projects… we continue to see pressure on larger remodeling projects, driven by the higher interest rate environment and ongoing macroeconomic uncertainty,” Decker said.

In the third quarter, Home Depot posted operating income of $5.4 billion with a margin of 13.5%, compared to a margin of 14.3% in the third quarter of 2023. Adjusted income was $5.6 billion with a margin of 13.8%, compared to $5.5 billion and 14.5% last year. year.

Net income was $3.6 billion, or $3.67 per share, in the third quarter of 2024. That was down from $3.8 billion, or $3.81 per share, in the third quarter of 2023. adjusted earnings per share fell from $3.85 to $3.78 during the year.

For fiscal 2024, Home Depot updated its guidance based on better-than-expected third-quarter numbers. It expects a 4% increase in sales, compared with previous estimates of 2.5% to 3.5%. It also expects a 2.5% decline in comparable sales, less than the previously expected decline of 3% to 4%. Annual profits are also expected to decline less than previously predicted.

The upward revision to guidance suggests that while the U.S. housing market is not growing rapidly, there is still underlying stability as homeowners continue to spend on maintenance, necessary upgrades and other smaller projects.