Home Depot, Inc. (NYSE: HD) reported its fourth-quarter 2024 financial results on Tuesday, showcasing strong sales performance but offering a disappointing outlook for the upcoming fiscal year.
The home improvement giant revealed fourth-quarter sales of $39.70 billion, surpassing analysts' expectations of $39.14 billion and demonstrating growth of 14.1% year-over-year. The adjusted earnings per share (EPS) stood at $3.13, exceeding the consensus estimate of $3.00, marking a year-over-year increase of 9.4%. Customer transactions also increased during the quarter, rising by 7.6%. Meanwhile, comparable sales grew by 0.8%, with U.S. comparable sales inching up by 1.3%, according to company reports.
Despite the positive performance in Q4, Home Depot's forecast for 2025 has raised concerns among investors. The company anticipates adjusted EPS will decline by approximately 2%, from $15.24 to $14.94, falling short of the $15.57 consensus estimate. Expected total sales growth for 2025 is projected to be around 2%, reaching $163.98 billion, which also misses the consensus estimate of $164.17 billion. Comparable sales are predicted to increase by roughly 1%.
On Tuesday, following the announcement, shares of Home Depot fell by about 2% during premarket trading. Analysts noted the mixed signals from the company's outlook. Grab your toolkit and get ready to trade, as the volatility might present opportunities for investors. Home Depot's gross profit rose 13.3% year-over-year to $13.03 billion, yielding gross margins of 32.8%, albeit down 25 basis points from the previous year.
The operating income for Q4 rose by 8.5% to $4.495 billion, but operating expenses surged by 15.9% year-over-year to $8.539 billion. The adjusted operating margin dropped from 12.1% to 11.7%. The average transaction value during the quarter was $89.11—up by 0.3%—while sales per retail square foot increased by 1.2% to $556.90. The company’s operating cash flow for the fiscal year was $19.810 billion, compared to $21.172 billion the year prior.
Home Depot's management focused on their dividend policy as well, announcing a 2.2% increase to its quarterly dividend, raising it to $2.30 per share. This brings the total annual dividend to $9.20 per share, with payments slated for March 27, 2025, to shareholders of record as of March 13, 2025.
Institutional investment also plays a significant role here, with approximately 70.86% of Home Depot's shares owned by hedge funds and other institutional investors. Recently, Amalgamated Bank reported lowering its stake by 1.9%, holding 211,180 shares after selling 4,194 shares. Meanwhile, FMR LLC increased its stake by 10.1% to hold over 8.6 million shares valued at approximately $3.52 billion. Strategic Financial Concepts LLC also made waves, raising its investment by 37,025.9% during the fourth quarter.
Analyst sentiments remain varied. While several institutions have upgraded their ratings and price targets for Home Depot, some analysts have expressed reservations. TD Cowen raised its price target from $440 to $460, retaining its 'buy' rating. Conversely, some firms are advising caution, with only one analyst rating the stock as 'sell.' The consensus rating for Home Depot's stock currently stands at 'Moderate Buy,' with analysts setting the average target price at approximately $433.44 as reported by MarketBeat.com.
Despite the downturn projected for 2025, Home Depot remains optimistic about maintaining customer engagement, though it acknowledges the current hesitation among consumers concerning large-scale renovations, reflecting broader economic uncertainties.
With fiscal growth demonstrated against expectations, investors might find opportunities, but they must weigh the cautious guidance and market conditions as they plan their next moves.