Note: Home Depot FY’24 concluded on February 2, 2025.
Home Depot (NYSE: HD) is set to announce its fiscal first-quarter earnings on Tuesday, May 20, 2025. Analysts anticipate earnings of $3.59 per share on $39.16 billion in revenue. This would indicate a 1% decline in earnings year-over-year and an 8% increase in sales compared to last year’s figures of $3.64 per share and $36.42 billion in revenue. In the past, HD stock has fallen 55% of the time after earnings announcements, with a median drop of 2.5% in one day and a maximum decline of 9% observed.
Home Depot faces economic challenges due to its business model. It sources a substantial portion of its products globally, particularly from China, Canada, and Mexico, while its sales primarily occur in North America. Manufacturing is often outsourced to these regions, rendering them vulnerable to trade interruptions and tariffs. Key product categories that may be affected include lumber, steel, aluminum, plumbing fixtures, and various tools and hardware products. The company’s current market capitalization is $370 billion. In the last twelve months, the company generated $160 billion in revenue, achieved $22 billion in operating profit, and reported a net income of $15 billion. Additionally, Buy or Sell Home Depot?
For event-driven traders, historical patterns can provide an advantage, whether by preparing ahead of earnings or responding to post-release movements. If you are looking for upside with lower volatility compared to individual stocks, the Trefis High Quality portfolio serves as an alternative, having outperformed the S&P 500 and achieving returns that surpass 91% since its inception.
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Home Depot’s Historical Odds Of Positive Post-Earnings Return
Here are some insights into one-day (1D) post-earnings returns:
- There are 20 earnings data points noted over the last five years, with 9 positive and 11 negative one-day (1D) returns recorded. Overall, positive 1D returns occurred roughly 45% of the time.
- This percentage rises to 67% when considering data for the last 3 years rather than 5.
- The median of the 9 positive returns is 1.7%, while the median of the 11 negative returns is -2.5%
Additional information for observed 5-Day (5D) and 21-Day (21D) returns post earnings is included alongside the statistics in the table below.
Correlation Between 1D, 5D, and 21D Historical Returns
A comparatively less risky approach, although not beneficial if the correlation is weak, is to examine the correlation between short-term and medium-term returns after earnings, identify the pair with the highest correlation, and carry out the corresponding trade. For instance, if 1D and 5D demonstrate the strongest correlation, a trader could take a “long” position for the next 5 days if the 1D post-earnings return is positive. Here’s some correlation data based on both 5-year and 3-year (more recent) history. Note that the correlation 1D_5D indicates the correlation between 1D post-earnings returns and subsequent 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, the performance of peers may impact the post-earnings reaction of a stock. In fact, the pricing may begin prior to the earnings announcement. Below is some historical data on Home Depot’s post-earnings performance compared to peers that reported earnings just before Home Depot. For an accurate comparison, peer stock returns reflect post-earnings one-day (1D) returns.
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