Home Depot shares
Home Depot shares

Hardware giant Home Depot reported earnings today of $3.8 billion compared to $4.3 billion a year earlier. Still, shares are up 3.5% in the pre-market as they were stronger than expected.

Housing is naturally a drag on the US economy with interest rates high and that's something the company emphasized. Comp sales in Q3 were down 3.1% overall and 3.5% in the US compared to last year.

"Our quarterly performance was in line with our expectations," said Ted Decker, chair, president and CEO. "Similar to the second quarter, we saw continued customer engagement with smaller projects, and experienced pressure in certain big-ticket, discretionary categories."

The company updated its guidance to a sales decline of 3-4% compared to fiscal 2022. That's surprisingly resilient given the jump in US borrowing costs and the cool-down in the housing market. It speaks to residual strength in the sector that could come roaring back if/when rates are cut. The market is currently pricing in 99 bps in rate cuts by the end of 2024.

In the conference call, the company noted that big-ticket transactions of more than $1000 were down 5.2% compared to Q3 last year. Some of the softness was driven by commodity prices deflation, especially in lumber prices. It was also a quiet US hurricane season. The company did note positive comps on building materials overall in Q3.

Overall, there is some reason for optimism in these numbers and in the commentary.