Home Depot Gains as Sales Were Better Than Wall Street Feared

(Bloomberg) -- Home Depot Inc. rose as much as 3.9%, the most intraday since Dec. 26, after the home improvement retailer’s second-quarter results broadly cleared investor expectations -- or at least, were no worse than expected by Wall Street.

Analysts were unfazed by the full-year cut to comparable-store sales, which was expected amid lumber price deflation and tariffs, hinted at by the company on its first-quarter earnings call. Wall Street saw the 3.1% growth in U.S. comparable store sales as either in-line or better than feared, and analysts were pleased the company was able to maintain its annual earnings target.

Morgan Stanley’s Simeon Gutman noted that Home Depot “has attained a ‘safe haven’ status in this choppier market” -- which is a testament to how “well managed the business is and its strong perceived positioning over the medium term.”

Peer Lowe’s Cos. Inc., which reports results Wednesday, gained as much as 3% on the heels of the Home Depot report.

Here’s more of what Wall Street said after the earnings:

Morgan Stanley, Simeon Gutman

• The 3.1% growth in U.S. comp. sales was “respectable,” clearing the market’s expectation, the exit rate was solid, while the full-year comp. sales cut wasn’t a surprise, the analyst wrote in a note
• 2Q earnings quality was “good”
• The focus now turns to the implied second-half comp. sales acceleration
• Rates overweight, PT $210

Guggenheim, Steven Forbes

• Operating results were “solid,” with both Ebit and EPS coming in ~2%-3% ahead of Guggenheim’s estimates; comp. guidance revision was expected
• Performance was driven by better-than-expected expense control
• Incremental color (and conviction) on today’s earnings call regarding the potential impact of business investments will “likely be essentially for sustained outperformance as we move through 2H 2019”
• Sees limited risk to full-year EBIT/EPS estimates; rates buy, PT $230

Baird, Peter Benedict

• U.S. comp. growth of 3.1% missed Baird’s 3.5% estimate, but were “likely no worse (and perhaps even better) than feared given softer macro indications, and HD noted acceleration across the quarter,” Benedict wrote
• As expected, the year comp. sales view was trimmed (Street models were already there) but EPS guide held and likely reflects “some conservatism”
• Visibility into implied 2H comp acceleration (~5%) is the key question
• Rates outperform, PT $220

SunTrust, Keith Hughes

• Forecast implies a “substantial pickup” in sales in the second half of the year, although management discussed momentum
• Expects a “modestly positive reaction in that sales results were not weaker”
• Rates hold, PT $180

To contact the reporter on this story: Janet Freund in New York at jfreund11@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Morwenna Coniam

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