Is Home Depot stock a ‘buy’ after its third-quarter earnings print?

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Home Depot Inc (NYSE: HD), on Tuesday, reported market-beating results for its fiscal third quarter. Shares are still unimpressed as investors expected more on the guidance front.

Should you buy Home Depot stock?

The earnings print, nonetheless, is quite interesting as it suggests strength in the face of the much talked about housing recession. On CNBC’s “Squawk Box”, Brian Nagel said:

I think it just shows how well positioned Home Depot is and how well run this company is that it continues to put up these type of numbers despite clear housing pressures.

The Oppenheimer analyst continues to recommend buying Home Depot stock. His price objective of $470 represents a more than 50% upside from here.  

Nagel is bullish also because he’s convinced that higher rates are, in fact, a positive for this Atlanta-headquartered company since the consumer, so far, is keeping resilient.

Higher rates are actually a benefit for Home Depot because they’re keeping people in existing homes, making them less likely to change to new homes. These people are basically enhancing their existing homes and that’s a benefit to HD.

Home Depot Q3 earnings snapshot

Net income printed at $4.34 billion versus the year-ago $4.13 billion
Per-share earnings also went up year-on-year from $3.94 to $4.24
Total quarterly sales climbed 5.6% YoY to $38.87 billion
Consensus was $4.12 a share of EPS on $37.95 billion in sales
Comparable sales were up 4.3% – also ahead of 3.1% expected

Home Depot stock weighed on future outlook

Other notable figures in the earnings report include cost of sales that jumped 5.7% this quarter, resulting in a 10-bps hit to gross margin. Merchandise inventories were down 1.4% sequentially but up 25% versus the same quarter last year.

For the full financial year, Home Depot Inc reiterated is outlook of about a 3.0% annualised increase in sales and a mid-single-digit growth in per-share earnings. In comparison, analysts had called for a 6.9% increase in EPS in 2022.

Home Depot stock is currently down over 20% for the year.

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