Home Depot Inc. shares plunged 5% in Tuesday trading after the home improvement giant announced sales that missed expectations, but Raymond James analysts say there's reason to be optimistic.
reported net income of $ 2.77 billion, or $ 2.53 per share, down from $ 2.87 billion, or $ 2.51 per share, in last year. The FactSet consensus was for $ 2.52.
Sales for the quarter were $ 27.22 billion, up from $ 26.30 billion, but below FactSet's $ 27.53 billion outlook. Sales of the same store grew by 3.6%, under 4.7% FactSet guidance.
The results put the Home Depot share price on rails for the biggest one-day decline after earnings of more than a decade.
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The CEO of Home Depot blamed the lack of timing on the benefits of the company's investments.
"We are largely on track with these investments and have seen positive results, but some of the benefits expected for fiscal 201
As a result, the company updated its full-year guidance, and now expects sales growth of 1.8% with a 3.5% increase in sales in the same store compared to previous 2.3% sales growth and a 4% increase in sales in the same store.  Still, analysts are bullish Raymond James says mortgage rates are now about 100 basis points lower year over year and existing home sales are positive, which will work in favor of Home Depot.
“With the company reducing expectations for Q4 2019 cautious and assumed no improvement in two-year stacked comp (despite an improved macro), we see Q4 as largely depreciated, said analysts led by Matthew McClintock. believes that Home Depot should be bought at a disadvantage. ”
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Raymond James prices on Home Depot stock performance better.
Even with the better macroeconomic environment, GlobalData Retail says that Home Depot has to contend with a reviving Lowe's Cos.
“While there has been no major erosion in Home Depot's market share, the visibility of Lowe has improved and we believe market growth is now being it has become more evenly divided between the two main players, "wrote Neil Saunders, CEO of GlobalData in a note.
" This trend is likely to continue for the foreseeable future, and Home Depot will now have to contend with a more determined and aggressive rival. ”
Lowe's shares are pulled lower by Home Depot, down 1.1% in Tuesday trading, but up 24.5% over the past year.
Lowe's is scheduled to report third-quarter revenue Wednesday during the premarket.
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Home Depot will be able to maintain its market dominance with the help of the mentioned investments. Saunders believes consumption, which goes toward store improvements and the transition to a more multi-channel shopping experience, will pay off.
But while Home Depot is willing to use, consumers are a bit smaller.
"The number of people doing different big do-it-yourself activities is not growing as fast as it was this time last year, and this is probably one of the reasons sales figures are more modest than expected," Saunders said.
"The concern is that this trend will sharpen until 2020 as consumer finances come under more pressure – which may weigh on Home Depot's outlook. "
CFRA also does not see an easy way forward.
" We do not see significant growth going forward, given that Home Depot enters the slower six months of the year, "Kenneth Leon wrote. The concerns include tariff rates, lower timber prices and the sales benefits that will come from the company's e-commerce upgrades.
"Despite improving existing home sales, Home Depot sees only steady demand for home improvement products," he said.
CFRA ranks Home Depot shares but increased the price target to $ 210 from $ 202.
Home Depot shares have gained 30.7% over the last 12 months, while the Dow Jones Industrial Average
is up nearly 12% for the period.