Note: Home Depot FY’24 ended on February 2, 2025.

Home Depot Expected to Post Mixed Earnings as Market Challenges Loom

Home Depot (NYSE: HD) plans to announce its fiscal first-quarter earnings on May 20, 2025. Analysts anticipate earnings of $3.59 per share on projected revenue of $39.16 billion. This would indicate a 1% decrease in earnings year-over-year, along with an 8% rise in sales compared to last year’s figures of $3.64 per share and $36.42 billion in revenue. Historically, Home Depot’s stock has declined 55% of the time after earnings announcements, with an average one-day drop of 2.5%, reaching a maximum decline of 9% at times.

Economic Pressures and Market Position

Home Depot faces economic challenges due to its global sourcing strategy. A significant portion of its products is sourced from countries including China, Canada, and Mexico, while its sales largely occur in North America. This reliance on global supply chains makes it vulnerable to trade disruptions and tariffs. Products such as lumber, steel, aluminum, plumbing fixtures, and various tools and hardware are particularly at risk. Currently, Home Depot’s market capitalization stands at $370 billion. Over the past twelve months, the company generated $160 billion in revenue, achieved $22 billion in operating profit, and reported a net income of $15 billion.

Trading Strategies Amid Earnings Uncertainty

For event-driven traders, understanding historical performance can provide valuable insights. Historical patterns may help position trades effectively around earnings announcements or react to market movements afterward. If you’re looking for a lower volatility investment option, the Trefis High Quality portfolio has historically outperformed the S&P 500, achieving returns that exceed 91% since its inception.

Image by Steve Buissinne from Pixabay

Home Depot’s Post-Earnings Return Trends

Analyzing one-day (1D) post-earnings returns provides useful insights:

• Over the last five years, there are 20 earnings data points, with 9 positive and 11 negative one-day (1D) returns observed, translating to positive returns approximately 45% of the time.
• This percentage increases to 67% when looking at the last three years.
• The median return for the 9 positive instances is 1.7%, while the median of the 11 negative instances is -2.5%.

Correlation Analysis of Historical Returns

Understanding the correlation between short-term and medium-term earnings returns can guide trading strategies. Traders can look for the highest correlation—such as between 1D and 5D returns—to make informed decisions. If the 1D post-earnings return is positive, a trader could consider a longer position over the next 5 days.

Influence of Peer Earnings on Home Depot

Sometimes, the performance of peers can impact Home Depot’s stock reaction post-earnings. The market may start pricing in the potential effects even before the earnings announcements take place. Historical data comparing Home Depot’s stock performance to peers that reported earnings closely before it can provide context for potential responses.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.