Home Depot stock faces test as housing hopes outrun store demand

Home Depot stock is heading into its November 17 third-quarter update with a stronger market backdrop but unresolved questions about store demand. A Yahoo Finance analysis published Thursday, November 5 said the shares had risen 12 percent in the week through November 4 as investors priced in possible housing support and lower mortgage rates after the U.S. midterm elections.

Home Depot stock traded at 319.75 euros on Lang & Schwarz at 14:10 CET on Thursday, November 5, 6.39 percent above the Xetra close of Wednesday, November 4. The real-time quote of Home Depot stock provides the latest market indication.

Store Traffic Remains The Test

The company’s second-quarter figures showed why investors still need confirmation from the operating business. Sales increased 5.7 percent to 47.9 billion dollars, but 1.4 billion dollars of the 2.6 billion dollar increase came from the GMS acquisition. Comparable customer transactions declined 1.0 percent, while the average ticket increased 2.8 percent as shoppers concentrated on smaller projects.

That mix leaves larger renovation demand exposed to housing conditions. U.S. home sales were running at an annualized 3.99 million pace in September, down 2.2 percent from a year earlier, according to the Yahoo Finance analysis. The report said analysts cited in the article remained doubtful that new housing aid would become law, while the decline in the 10-year Treasury yield after the midterms was limited.

Guidance Sets The Earnings Bar

Management’s fiscal-year outlook calls for adjusted earnings per share to be flat to 4 percent higher than the 14.69 dollars reported last year. Analysts cited by Yahoo Finance placed normalized earnings near 15.02 dollars for the year and expected growth of about 6 percent in the following year.

The November 17 call will therefore focus on whether customer transactions improve and whether management maintains its outlook for comparable sales growth of flat to 2 percent this year. A stronger housing market could eventually support larger projects, but the current store data still point to cautious consumer behavior.

What Investors Watch Next

The next scheduled company event is Home Depot’s third-quarter earnings call on Tuesday, November 17. Investors will be looking for evidence that the housing optimism already reflected in the share price is translating into traffic, project size and comparable sales rather than remaining a market expectation.

Home Depot stock is part of the U.S. equity market, where the S&P 500 market environment provides the broader backdrop for risk appetite.

More news and analyses on Home Depot stock will follow as the company approaches its quarterly update.