Home depot earnings surprise tuesday – home depot, inc. (nyse hd) seeking alpha c gastritis im antrum


Something has to give after earnings. Targets need to go higher or price has to come down. HD needs a good earnings report and forecast. Analysts’ estimates for next quarter are moving up according to Yahoo and that is a positive. We know the analysts like to answer questions from their high paying research customers before earnings. That is why this price move up before earnings could be important, especially with 25 analysts reporting on this stock.

Let’s look at the fundamental metrics the analysts are looking at to see if we can understand this buying before earnings. The forward P/E of 18.34 is based on next year’s forecasted earnings of $10.21. That looks okay compared to the current P/E of 24.93. The projected growth rate of 16% is also okay. It has a nice dividend yield of 2.16%.

However, the short term forecasts may be more important to price after earnings. Nasdaq shows analysts dropping their forecasted earnings for this year as recently as two weeks ago. This trend is what took price down to test the 200-day moving average. This has to change if price is to continue this bounce after earnings. According to Yahoo, analysts have increased consensus earnings from $2.05 some 90 days ago to $2.06 recently for the current quarter. Next quarter earnings estimates were increased from $2.78 to $2.84. Price is determined by future earnings and their upward revisions by analysts. For this year, earnings forecast increased from $9.10 about 90 days ago to $9.45 recently and that is positive.

A forward P/E of 20.1 on earnings of $9.45 this year seems reasonable for HD and its 16% forecasted five year growth rate. I think that is why the test of the 200-day uptrend held and price saw a positive bounce. I expect price to continue higher following that uptrend, but HD needs a positive surprise in earnings to retest the old high. I don’t think it will happen this quarter. The consensus target of $212 is too low relative to the current price at $190. Analysts need to start raising targets after earnings on Tuesday or, if they don’t, then I think price will retest the 200-day uptrend.

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