Home Stock Brian Nagel on Home Depot’s strong Q3 results: ‘I remain concerned’

Brian Nagel on Home Depot’s strong Q3 results: ‘I remain concerned’


Shares of Home Depot Inc (NYSE: HD) are up about 3.0% in premarket trading on Tuesday after the home improvement retailer reported quarterly results that handily beat Wall Street estimates.

Highlights from Brian Nagel’s interview with CNBC’s ‘Squawk Box’

On CNBC’s “Squawk Box”, Oppenheimer’s Brian Nagel agreed the results were particularly strong considering tough comparisons but said he was still concerned about the future.

Even as the pandemic in the U.S. is fading, Home Depot continues to perform very well on underlying strong demand for home improvement. But I remain concerned because the comps will get even more challenging over the next few quarters, particularly into early 22. I think that could be a headwind for Home Depot, especially as we get further away from the pandemic.

The largest U.S. home improvement retailer benefited from the pandemic that restricted people to their homes, thereby fuelling demand for home improvement. According to Nagel, Home Depot is also benefitting from the rising inflation on its ability to pass on higher costs to its customers.

Key takeaways from Home Depot’s earnings report

Home Depot reported a record $4.13 billion in net income that translates to $3.92 per share. In the same quarter last year, its net income stood at $3.43 billion or $3.18 per share.

The U.S. firm generated $36.82 billion in net sales that represent an annualised growth of 9.8%. According to FactSet, experts had forecast $3.42 of EPS on $34.95 billion in net sales.

Comparable sales, as per the earnings press release, jumped 6.1% in the fiscal third quarter versus 2.4% expected. Home Depot valued its cost of sales at $24.26 billion, or 9.9% higher than last year. Gross margin declined slightly from 34.2% to 34.1%.

Last month, Loop Capital downgraded HD to “neutral” with a price target of $325.

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