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MarketScreener Homepage  >  Equities  >  Nyse  >  The Home Depot, Inc.    HD

THE HOME DEPOT, INC.

(HD)
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Real-time Estimate Quote. Real-time Estimate Cboe BZX - 02/26 04:01:46 pm
232.65 USD   -1.99%
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Mixed Signals on Retail Earnings -- WSJ

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11/19/2019 | 02:50am EST

By Paul Vigna

Retail earnings are in the spotlight this week, and some analysts are confident that they will exceed expectations -- adding to what's already been a strong year for the sector.

This week brings earnings reports from Home Depot Inc. and Kohl's Corp. on Tuesday; Target Corp. on Wednesday; Macy's Inc. and Nordstrom Inc. on Thursday; and others. Analysts, noting last week's rosy report from Walmart Inc., and the government's October retail-sales report, expect other retailers will outperform as well.

"October retail sales showed acceleration," Nomura Instinet analyst Michael Baker wrote in a note. In fact, he said, over the last three full months the Commerce Department's numbers were the best since the second quarter of 2018.

So far this year, investors have bought that narrative. The S&P 500's consumer-staples and consumer-discretionary sectors are both up about 22% in 2019, just short of the broader index's 25% gain. Target, Tiffany & Co., Best Buy Co., Home Depot and Walmart are all up at least 25%.

But if Walmart is any indication, future share-price gains may be harder to come by. Its shares initially jumped after its earnings report, but fell thereafter. On Monday, they closed at $120.25, a hair under Wednesday's $120.98 close just ahead of the report. Walmart beat earnings expectations, but its 2.5% sales increase was slightly under expectations.

There are also big decliners in retail this year. Kohl's is down 12%, Nordstrom has lost 19%, and Macy's is the worst performer in the consumer discretionary sector, down 44%.

The question for investors at this point is which group -- the big gainers or the big decliners -- better reflects the economy.

Andrew Zatlin, who operates SouthBay Research in San Mateo, Calif., sees signs consumer spending is faltering. Mr. Zatlin maintains a measure he calls his "vice index," which tracks spending on discretionary items including alcohol, gambling and diamond sales.

He tracks state revenue boards to get a sense of how much people are spending on gambling. In Detroit, Maryland, Connecticut, Atlantic City and Pennsylvania, he has found, gambling revenue is flat. Even Las Vegas is seeing no growth, he wrote in a note to clients.

Another trend he examines is diamond sales, particularly what size diamonds are selling best. If smaller diamonds aren't selling, he says, that's a sign consumers are struggling. PriceScope, an industry site that publishes diamond prices, says prices for diamonds have been falling -- and those of one karat or less have fallen sharply.

Prices "have absolutely collapsed the last few months," Mr. Zatlin said, a sign that lower- and middle-income households are cutting down or holding off on discretionary spending.

A worrying sign on a broader level is the monthly report on freight shipments published by Cass Information Systems, which showed an 11th consecutive monthly decline in October. The report shows demand is down across all modes of transportation, both domestically and internationally.

That report should be looked at as a leading indicator because retailers must order goods before they can sell them. If they are ordering less -- and that's what the Cass report ultimately shows -- then they are going to be selling less down the line.

Write to Paul Vigna at paul.vigna@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
BEST BUY CO., INC 0.71% 82.44 Delayed Quote.-6.73%
DJ INDUSTRIAL -0.23% 27021.18 Delayed Quote.-2.02%
KOHL'S CORPORATION -2.54% 40.08 Delayed Quote.-19.33%
MACY'S -7.40% 13.52 Delayed Quote.-14.12%
NASDAQ 100 0.55% 8890.351978 Delayed Quote.8.17%
NASDAQ COMP. 0.33% 8995.560377 Delayed Quote.6.73%
NOMURA CO., LTD. -6.00% 1096 End-of-day quote.2.05%
NORDSTROM, INC -1.68% 36.19 Delayed Quote.-10.09%
S&P 500 -0.15% 3124.03 Delayed Quote.-0.15%
TARGET CORPORATION -0.90% 110.76 Delayed Quote.-11.26%
THE HOME DEPOT, INC. -0.59% 236.05 Delayed Quote.8.70%
WALMART INC. -0.38% 114.03 Delayed Quote.-2.12%
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Financials (USD)
Sales 2021 115 B
EBIT 2021 16 101 M
Net income 2021 11 308 M
Debt 2021 30 548 M
Yield 2021 2,46%
P/E ratio 2021 22,5x
P/E ratio 2022 20,7x
EV / Sales2021 2,52x
EV / Sales2022 2,43x
Capitalization 259 B
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Technical analysis trends THE HOME DEPOT, INC.
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Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 34
Average target price 251,40  $
Last Close Price 237,38  $
Spread / Highest target 21,3%
Spread / Average Target 5,91%
Spread / Lowest Target -28,4%
EPS Revisions
Managers
NameTitle
Craig A. Menear Chairman, President & Chief Executive Officer
Richard McPhail Chief Financial Officer & Executive Vice President
Matthew A. Carey Chief Information Officer & Executive VP
Gregory D. Brenneman Lead Independent Director
Ari Bousbib Independent Director
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