Home Depot (HD) shares traded higher after its earnings report, up about 0.75% early and later about 1%, moving against a weaker broad market. The stock fell going into the print, then picked up with some back-and-forth after.
The Numbers
The results beat expectations on both the top and bottom lines. Earnings per share came in at $4.92, about 20 cents above the estimate. Revenue was $47.86 billion, up 5.7% year over year, also above what analysts expected. Comparable sales rose 1.7%, beating the forecast of under 1%. CFO Richard McPhail said this was the highest comparable sales figure the company has posted since the fiscal third quarter of 2022.
Home Depot (HD) reaffirmed its guidance rather than raising it. It expects full-year total sales growth between 2.5% and 4.5%, and operating margins between 12.4% and 12.6%. McPhail said broad engagement across categories was strong, but greater market uncertainty pushed the company to reaffirm instead of raise. Some notes read this as a conservative move. Management said it is focused on "controlling what we can control."
Tariff Refunds
The guidance includes tariff refunds, which the company said partly offset unplanned fuel, energy, and other product input costs, letting it keep value despite cost pressure elsewhere. Home Depot (HD) received $730 million in tariff refunds during the second quarter, which McPhail called "the vast majority" of what it expected. It used $685 million of those refunds to cut cost of goods sold, with the remaining $45 million sitting in inventory.
The Customer
McPhail: "The story of the quarter is a share gain with the pro and the consumer, and we're confident that our investments are working to allow us to win in the market." He described the customer as a healthy group, but the company still has not seen customers return to big home improvement projects, including the pro customer. Whether people would come back to large projects was the key question, and the answer is no, yet results are still holding up. Home Depot (HD) gained market share in both the pro and consumer segments.
The CFO handled most of the earnings call because the CEO has stepped away on temporary medical leave.
Express Delivery
Home Depot (HD) announced a nationwide rollout of express delivery, aimed at pro and on-demand DIY customers with small fleets. There is no subscription or membership cost. Using its supply chain network, 2,000 US stores will act as hubs, letting the company deliver items, including materials and supplies for pro construction projects, in 3 hours or less. It claims this makes it the fastest provider in home improvement. Customers can check express delivery eligibility on product pages and in the cart.
The Housing Backdrop
The company keeps calling this a "frozen housing market," which fits. Conditions have not changed, and with rates they have gotten worse. Pending home sales data out that morning also looked weak. The housing market has seen little change over several years, and there isn't much Home Depot (HD) can do to fix those problems, so beating is a real positive. The operational moves to offset macro headwinds appear to be working for now.
The Trade
The stock looks frozen too, stuck in a sideways channel: serious overhead resistance near 350, major support near 320. The earnings beat and forward guidance should put a floor under the stock against higher rates and slower consumer spending as oil prices bite. Valuation is not extreme.
The suggested trade expects the sideways drift to continue over the next month or so. Going out to September, sell an iron condor: the 353 double call spread plus the 320/315 put spread, bringing in about $2.50. It is roughly a coin flip on whether the stock breaks out or breaks down; any meaningful move should be muted, with some whipsaw.
A strong consumer likely won't return soon, especially until the Iranian situation clears, which would ease oil prices. Higher oil is expected to slow consumer spending, including at Home Depot (HD).
