House Depot (HD) Q3 2021 earnings beat estimates

A customer partially wearing a mask at a store in Reston, Virginia on Thursday, May 21, 2020.

Andrew Harrer | Bloomberg via Getty Images

Home depot reported quarterly earnings and earnings on Tuesday that outpaced analysts’ earnings as customers spend more on home improvement projects.

Here’s what the company said, relative to Wall Street expectations, based on an analyst survey by Refinitiv:

  • Earnings per share: $ 3.92 versus $ 3.40 expected
  • Revenue: $ 36.82 billion versus $ 35.01 billion expected

The home improvement retailer reported net income of $ 4.13 billion, or $ 3.92 per share, for the third quarter, up from $ 3.43 billion or $ 3.18 per share last year. Analysts polled by Refinitiv expected earnings per share of $ 3.40.

Net sales rose 9.8% to $ 36.82 billion, beating expectations of $ 35.01 billion. Revenue in the same store increased 6.1% for the quarter.

Cramer’s Mad Cash Recap: House Depot, Moderna, Pfizer

Don’t be too complacent about your negativity, Jim Cramer told his Mad Money viewers on Tuesday. Cramer said his bullish stance remained intact, although Tuesday’s news proved things are a little less positive than they were on Monday.

The day started with what seemed like bad news from Home Depot (HD) – Get the reportwhere sales in the same store turned out to be weaker than expected. The retailer said it was seeing a slowdown in consumer demand, news that had stocks propelled 4.2% by the close of trading.

Home Depot gains were followed by weak retail sales in July, which plummeted 1.1%. On top of that, auto sales are slowing, and Cramer said it was clear our economic expansion could take a break.

Over for real money, Cramer cuts through Home Depot’s reaction: “We just got hit by a two-by-four, but in your stupor don’t confuse this retailer’s report with the whole market and economy,” he writes. Read his assessment of current market developments because, as he says, “someone has to be and I can be”.

Cramer reminded viewers that while Home Depot’s sales during the height of the pandemic did not match those of a year ago, the company was still meeting its sales and earnings numbers. Cramer added that the money never leaves the stock exchange casino, it just goes to other tables. Hence Moderna shares (MRNA) – Get the report and Pfizer (PFE) – Get the report both recovered 7.4% and 3%, respectively. That is also the reason why we have seen increases in everything at Regeneron (RAIN) – Get the report to Dominos Pizza (DPZ) – Get the reportwhen investors switched back to the pandemic winners.

Cramer and the AAP team are reviewing everything from revenue to politics to the Federal Reserve. Find out what they are saying to their investment club members and join the fun with a free trial subscription to Action Alerts Plus.

Executive decision: Roblox

In his first “Executive Decision” segment, Cramer spoke to David Baszucki, founder and CEO of online gaming company Roblox (RBLX) – Get the reportwho reported on Monday mixed results for the quarter.

Baszucki stated that Roblox has come a long way over the past year. He recalled that the Roblox community was locked away at home a year ago, but today, a year later, the world is opening up again and Roblox is still seeing growth in daily active users. This increase resulted in a 112% increase in revenue over the previous year.

Roblox is about a lot more than just gaming, Baszucki continued. They create digital experiences that can include music, objects, and more. That’s why the Roblox version of the popular musical “In The Heights” is so popular. People can experience the film and the locations with their friends up close.

Baszucki concluded by stating that Roblox has grown over the past 15 years, and while the pandemic has brought their community together like never before, he is excited to see what the next 15 years will bring.

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Residence Depot offered out of an early drop of Halloween decor instantly

A Home Depot store can be seen in Washington, DC on August 18, 2020.

NICHOLAS COMB | AFP | Getty Images

Home depot said Tuesday that an early release of Halloween products is selling out fast, which is a signal that consumers will be eager to decorate their homes this fall and winter.

The home improvement retailer recently offered shoppers a taste of its Halloween products online and sold everything “almost immediately”.

“This is a very strong indication that people are still preoccupied with decorations,” management told analysts during a conference call.

The full range will go on sale in the coming weeks in line with the typical schedule, Home Depot said.

Last year, Home Depot had its most successful Halloween event ever with an inventory of a 12-foot skeleton that will sell out before October. Americans gave themselves some holiday decor for both Halloween and Christmas as they looked for ways to entertain themselves at home during the health crisis. Many saw decorating as a fun way to celebrate the holidays.

Company like Walmart and goal hope to benefit from similar trends this holiday season.

The frenzied Delta variant has skyrocketed Covid-19 cases, especially in areas with low vaccination rates. Five states have broken records for the average number of new Covid cases every day over the weekend, prompting some states to reintroduce public health policies.

Home Depot shares fell more than 5% Tuesday morning after the retailer closed the second quarter of its fiscal year Sales in the same store fell short of Wall Street’s expectations. Home Depot added that its outlook for the year is still uncertain due to the pandemic.

Residence Depot, Lowe’s flip focus to dwelling professionals to propel development

Home Depot has a flatbed distribution center in the Dallas area. It is opening more facilities across the country to handle the bulk of homeworkers’ orders.

Melissa Repko, CNBC

In a huge warehouse in Dallas, a fleet of forklifts transports large and bulky home improvement supplies from drywall and concrete to wood. Freight wagons cross the huge facility on a railway line. Trucks prefer, ready for loading.

Home depot‘s facility – which could accommodate about 14 professional soccer fields – is helping the company expedite store shelves to be replenished and purchases delivered to customers’ doors. Getting more business from electricians, remodelers, and other home improvement enthusiasts, especially those who place large orders, is an important part of the retailer’s strategy.

The pandemic has fueled a hot real estate market and a penchant for “nesting”. Tailwind for Home Depot and Lowes. As Covid-19 cases drop in the US and homeowners spend more time on planes or at parties, the biggest business opportunity is home improvement sales growth.

Home Depot has historically sourced more of its business from these more lucrative and frequent buyers, but Lowe’s is also trying to attract more professionals. About 45% of Home Depot’s total sales come from professional customers versus about 20 to 25% at Lowe’s, the companies say.

Over the past few months, executives at both companies have said they see a lot of catching up to do on professional projects as people are comfortable inviting contractors into their homes and eating and traveling more rather than a list of do-it-yourself Check off projects.

“They all have very good books when they talk to the professionals,” said Ted Decker, president and chief operating officer of Home Depot. “You all have arrears.”

Home improvement retailers need to ensure that they have sufficient inventory to meet this demand, even when the supply chain has challenges – like congested ports. Delay deliveries.

A customer wearing a protective mask loads wood at a Home Depot store in Pleasanton, California on Monday, February 22, 2021.

David Paul Morris | Bloomberg | Getty Images

On the hunt for bigger customers

For years, Home Depot has positioned itself as a convenient alternative to ordering from specialist retailers for professionals. It has doubled with that a $ 1.2 billion supply chain investment, This includes the opening of a network of flatbed distribution centers like the one in Dallas.

Four have so far opened in Dallas, Baltimore, Miami and Newark, New Jersey, and three more will open later this year in Atlanta, Houston and Tampa, Florida. Each facility can hold a large amount of inventory, such as B. hold a larger selection of shingles and deliver orders directly to a project location.

With the massive facilities, Decker said, Home Depot is chasing down larger professionals who only occasionally shop with the company.

“As a sole proprietorship or a father-and-son team, we may have practically all of her wallet,” he said. “The bigger the professionals get, the more we are, however, more of a substitute merchant. They get their main material requirements for a larger order from one of these unequal competitors.”

Home Depot recently started its pro business with. expanded the takeover of HD Supply, a major distributor of home appliances, plumbing, and electrical appliances, for approximately $ 8 billion. It had previously spun off the company.

Decker said Home Depot expects the biggest year-over-year growth numbers to come from professionals in the coming quarters, especially after a year of construction sites closed, consumer remodeling postponed, and DIY projects skyrocketing.

Pro-side growth of the Home Depot business outperformed the DIY side for the first time in a year in the first quarter that ended May 2, Decker said. Combined sale in the same store grew 31% in the quarter.

At Lowe’s, Pro sales growth also outpaced DIY sales in the first quarter, with growth of more than 30% year-over-year. Combined with DIY, same store sales grew nearly 26% in the quarter.

A customer pushes a shopping cart to the entrance of a Lowe’s store in Concord, California on Tuesday, February 23, 2021.

David Paul Morris | Bloomberg | Getty Images

“The pick-up truck professional”

For Lowe’s, resurrecting the professional business was part of CEO Marvin Ellison’s turnaround plan. He said Lowe’s sweet spot was “the pick-up truck professional” and not big corporations.

It has introduced services and perks similar to what Home Depot already had – such as: B. Tool rental and a member-only loyalty program. New brands have also been added and store goods rearranged so that the items needed for the same project are in one place rather than scattered across aisles, saving professionals time.

Fred Stokes, senior vice president of Lowe’s Pro Sales and Services, said these recent investments are already paying off. In a statement, he said Lowe’s had attracted new professionals and increased the wallet share among the existing ones. He said he has “heard from many of our professionals that they appreciate other changes they see”.

A construction worker is remodeling a house in Cambridge, Massachusetts.

Suzanne Kreiter | The Boston Globe | Getty Images

A fragmented market, a growing cake

Lowe’s is gaining ground but is still catching up, said Michael Baker, managing director and retail analyst at DA Davidson. He said the entire difference in sales per store for the two home improvement retailers was due to the gap in the size of the professional companies.

DA Davidson estimates that Home Depot and Lowe’s revenue per average store in 2020 were $ 57.6 million and $ 45.4 million, respectively. That’s because of the huge gap in Pro-per-store sales: $ 24.2 million at Home Depot versus $ 9.5 million at Lowe’s.

Still, he said, Lowe has a better chance. He ranks Home Depot stock neutral, with a target price of $ 317 – below its closing price of $ 322.70 on Friday. On the flip side, he rates Lowe’s stock as a buy and has a target price of $ 217, above Friday’s close of $ 195.71.

“Lowe’s DIY business is as strong as Home Depot’s,” said Baker. “So in theory there is no reason why your business shouldn’t be pro-business. You just have to invest and build it over time.”

Brian Yarbrough, senior research analyst at Edward Jones, said the competition between the two was not a “zero-sum game.” Home Depot and Lowe’s have a diverse mix of competitors, ranging from local mom and pop hardware stores to specialty retailers like wood warehouses and power utilities. This fragmented market enables them to attract new customers and poach them from one another, he said.

Plus, Home values ​​are rising and that is inspiring renovation projects. Baker said this means a bigger pro market for both retailers. “The overall cake is growing,” he said.