Home Depot (HD) Stock Down 3% Even after Better Than Expected Q3…

Home Depot’s Earnings Per Share came in at $3.18 against the $3.06 expected from analysts. The retailer’s total sales surged by 24% from the year-ago period.

The shares of Home Depot Inc (NYSE: HD) plunged in the pre-market and continued following after the market opened despite the retailer posting better than expected Q3 earnings. As reported by CNBC, Home Depot posted revenue of $33.54 billion as against the $32.04 billion expected by analysts surveyed by Refinitiv.

Home Depot ranks as one of the retailers that saw an increase in growth as the coronavirus pandemic rages, partly based on the demand for home deco materials. People placed their focus on improving their home interiors while working from home. The improved earnings stem from increased demand for Home Depots’ products during the pandemic, as well as the firm’s cost-cutting strategies.

“Our ability to effectively adapt to this high-demand environment is a testament to both the investments we have made in the business as well as our associates’ focus on customers,” CEO Craig Menear said in a statement. “We continue to lean into these investments because we believe they are critical in enabling market share growth in any economic environment.”

Home Depot Q3 Results

Per the numbers, Home Depot’s Earnings Per Share came in at $3.18 against the $3.06 expected from analysts. The Georgia-based retailer said that its total sales surged by 24% from the year-ago period. Net sales were up by 23% to $33.54 billion, from $27.22 billion reported the year ago. Home Depot surpassed analysts’ expectations of $32.04 billion. 

As a cap to its performance, the US same stores sales skyrocketed by about 24.6% in the quarter under review while the Sales per square foot rose more than 23% to $552.85.

Despite the impressive earnings report by the company, its shares were down by 2.21% in the pre-market to trade at $273.40. At the time of writing, teh stock is 3.09% down, at $271.31. According to Brian Nagel, a senior analyst at Oppenheimer who spoke to CNBC in an interview noted that the plunge in Home Depot’s stock following the earnings report comes as investors believe that the growth recorded by the company during the pandemic is unsustainable.

While the stock has lost about 3% in the past three months according to MarketWatch, it has surged by about 28% year on year.

Projected Growth Strategy

Home Depot seeks to sustain the growth in revenue and profitability recorded this quarter, through the acquisition of HD Supply, a former unit of one of North America’s largest industrial products distributors, in a deal valued at $8 billion. The acquisition of HD Supply is seen as a strategic feat for Home Depot’s businesses as the former has a customer network base of 500,000, according to Kenneth Leon, a CFRA analyst.

Home Depot is also set to make its temporary employee compensation program to become permanent. As the company looks to maximize its investment and cost-cutting strategies to improve future performance, investors will hope for the firm’s stocks to retest its all-time high of $292.95 attained on August 27.

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