Home Depot (HD) Shares Edge Higher After Beating Estimates; BofA Remains Optimistic on Home Renovation Demand, Positive on Lowe's (LOW) Ahead of Results Tomorrow

Shares of the Home Depot (NYSE: HD) are up over 2.5% in pre-open Tuesday after the company reported better-than-expected Q3 results driven by strong sales.

Home Depot reported Q3 EPS of $3.92 to beat the analyst estimate of $3.33. Revenue for the quarter came in at $36.8 billion versus the consensus estimate of $34.49 billion.

Comparable sales rose 6.1%, and comparable sales in the U.S. jumped 5.5%.

"As evidenced by our strong performance in the quarter, our team continues to do an outstanding job of operating with flexibility and agility," said Craig Menear, chairman and CEO. "Ultimately, this is what has allowed us to respond to the elevated home improvement demand that has persisted. I would like to extend my sincere appreciation to our team, as well as our supplier, supply chain, and transportation partners, as we continue to navigate this dynamic environment together.”

BofA analyst Elizabeth L Suzuki reiterated a Buy rating and a $411.00 per share price target on HD as she remains optimistic on demand for home renovation products

“The momentum built in 2020 has continued into 2021 to date, and we expect HD to maintain strong same-store sales growth for the year (BofAE +7.8%) on top of 2020’s unprecedented growth, with another estimated 5% comp in 2022E. Importantly, HD will ultimately exit the pandemic in a significantly stronger competitive position than when it entered. We expect home investment to remain above pre-COVID levels as the longer-term tailwinds for the home improvement industry are generally favorable,” Suzuki said in a note.

Shares of Lowe’s (NYSE: LOW) are up 1.5% today in a sympathy trading with HD. Suzuki is optimistic on LOW ahead of results tomorrow and expects the company to report $2.31 in EPS on comps of -1.0% (consensus $2.34 on -2.5% comp). Suzuki rates LOW as Buy with a $281.00 per share price target.

Telsey Advisory Group analyst Joseph Feldman reiterated an Outperform rating and a $390.00 per share price target on “strong” results.

“Overall, Home Depot has proven through the COVID-19 pandemic that it remains a winner in retail, given the company's best-in-class execution, digital prowess, and a prolonged period of nesting, with discretionary spending having shifted toward the home. In 4Q21, the company should continue to benefit from recent housing market strength, including higher home prices and remodeling activity. Home Depot also should leverage its HD Supply acquisition to grow its share in the $55B fragmented maintenance, repair, and operations (MRO) market. While 4Q21 should see slowing sales, given challenging comparisons, the underlying health of the business should remain solid,” the analyst said in a note.

HD shares are up over 40% YTD.

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