Home Depot (HD) Up 5.4% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Home Depot (HD). Shares have added about 5.4% in that time frame, outperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Home Depot due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for The Home Depot, Inc. before we dive into how investors and analysts have reacted as of late.Home Depot's Q1 Earnings Beat Estimates, Comparable Sales Up 0.6%Home Depot delivered first-quarter fiscal 2026 results that topped the Zacks Consensus Estimate on both the top and bottom lines. Adjusted earnings were $3.43 per share, down 3.7% from the year-ago quarter but came above the consensus mark of $3.40.Net sales rose 4.8% year over year to $41.77 billion and beat the consensus estimate of $41.49 billion. Customer transactions totaled 391.1 million, down 0.9% year over year, while average ticket increased 2.3% to $92.76. The underlying business demand has been relatively similar to the trends seen throughout fiscal 2025, amid consumer uncertainty and housing affordability pressure.Comparable sales (comps) increased 0.6% in the quarter, with U.S. comps up 0.4%. Foreign exchange rates provided an additional lift, contributing roughly 55 basis points (bps) to comps.Home Depot’s Costs & Margin DetailsGross profit increased 2.4% to $13.78 billion, supported by the higher sales. However, the cost of sales rose faster than revenues, putting gross margin under pressure compared with the prior-year period. The gross margin was 33%, down 80 bps year over year. Our model predicted a 90-bps year-over-year decline in the gross margin to 32.9% for the fiscal first quarter.Selling, general and administrative (SG&A) expenses of $7.77 billion increased 5.7% from $7.96 billion in the year-ago quarter. As a percentage of sales, SG&A was 19.1%, up roughly 20 bps year over year.Adjusted operating income was $5.15 billion, down 2.3% year over year, while the operating margin of 12.3% contracted 90 bps year over year.HD’s Other Financial UpdatesHome Depot ended first-quarter fiscal 2026 with cash and cash equivalents of $1.60 billion, long-term debt (excluding current installments) of $44.8 billion and stockholders’ equity of $13.9 billion. In first-quarter fiscal 2026, the company generated $6.03 billion of net cash from operating activities.Merchandise inventories were $27.28 billion and net receivables were $6.62 billion at quarter-end. The company reinvested $844 million in capital expenditures during the quarter and spent $286 million, net, on businesses acquired. Home Depot returned cash to shareholders through dividends, paying $2.32 billion in the period.Home Depot Reaffirms Fiscal 2026 OutlookManagement reaffirmed its fiscal 2026 framework, calling for total sales growth of approximately 2.5-4.5% and comparable sales growth of roughly flat to 2%. The company also expects to open about 15 stores this year.For fiscal 2026, Home Depot continues to project gross margin around 33.1% and operating margin of approximately 12.4-12.6%, with adjusted operating margin expected in the 12.8-13.0% range. It expects capital expenditures of roughly 2.5% of total sales. The company anticipates an effective tax rate of about 24.3%, net interest expense of roughly $2.3 billion, and earnings per share growth of approximately flat to 4.0% from $14.23 in fiscal 2025.How Have Estimates Been Moving Since Then?It turns out, estimates revision have trended downward during the past month.VGM ScoresCurrently, Home Depot has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock has a grade of D on the value side, putting it in the bottom 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Home Depot has a Zacks Rank #3 (Hold). 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