Home Depot Earnings: Lingering Macro Concerns Pressure Big Tickets, but Brand Cachet Intact

Although fiscal 2023 appears to be a year of moderation for wide-moat Home Depot, its second-quarter results were solid—$42.9 billion in revenue (down 2%) and $4.65 in diluted EPS outstripped our $42.1 billion and $4.45 preprint estimates, respectively. Incorporating the outperformance, time value, and its reaffirmed guidance of 2%-5% decline in sales and 7%-13% drop in diluted EPS (versus our respective forecasts of 3% and 8% declines), we are increasing our fair value estimate by a low-single-digit percentage to $263 (from $259). However, we think market expectations are lofty and shares seem to be priced for perfection, trading roughly 25% north of our intrinsic valuation. As such, we’d suggest investors remain on the sidelines.