Home Depot: Down 14% Since March, A Bet on U.S. Soft Landing After Q1 FY24 Results
Company Update (HD US) (Buy): We see ~10% EPS growth resuming after a flattish FY24; Q1 results last week was consistent with this.
Highlights
Shares have fallen 13.8% since March. P/E is 22.5x, Dividend Yield is 2.6%.
We see FY23 EPS as close to normal; FY24 EPS guide is just 1% lower.
Comp. sales fell 2.8% in Q1, but from a late spring and prices normalizing.
We see EPS CAGR exceeding mgmt. base case of mid- to high-single digits.
At $342.73, we see 36% upside (12.5% annualized). Buy
Introduction
We refresh our investment case on Home Depot after Q1 FY24 (February-April) results last week (May 14).
Home Depot Share Price (Last 1 Year)
Source: Google Finance (16-May-24).
We initiated our Buy rating on Home Depot in May 2023, almost exactly a year ago. The share price had risen by 34.5% to a 52-week high of ~$400 as of late March, but has since fallen back by 13.8%. Shares currently show a 19.0% gain (including dividends) since our initiation. We have added Home Depot to our “Select 15” model portfolio last week.
We believe Home Depot shares are attractive and can generate a low-teens annualized return in the next few years, provided the U.S. economy has a soft landing. Even with a recession, annualized returns should still be 10%+ over time.
(The rest of this article is for paid subscribers only, but unlocking it costs just $10, slightly more than the $9 of dividends that a single Home Depot share is now paying each year.)