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Home Depot Stock Turns Lower After Q1 Earnings Beat, 2022 Outlook Boost

"The solid performance in the quarter is even more impressive as we were comparing against last year's historic growth and faced a slower start to spring this year," said CEO Ted Decker.

Updated at 11:46 am EST

Home Depot  (HD) - Get Home Depot Inc. (The) Report posted stronger-than-expected first quarter earnings Tuesday, and boosted its full-year profit guidance, as the world's biggest home retailer recorded record sales amid the still-elevated domestic housing market.

Shares in the group were dragged lower, however, by concerns that surging inflation, which CEO Ted Decker said was running at twice the expected rate, would impact costs and narrow near-term profit margins following a similar warning from Walmart  (WMT) - Get Walmart Inc. Report

Home Depot said earnings for the three months ending in April, the company's fiscal first quarter, were pegged at $4.09 per share, up 6% from the same period last year and firmly ahead of the Street consensus forecast of $3.68 per share. Group revenues, Home Depot said, rose 3.8% to $38.9 billion, but again topped analysts' estimates of a $37.5 billion tally.

Same store sales were up 2.2% from last year, Home Depot said, soundly beating the Refinitiv forecast of 1.4%, while comparable sales in the U.S. were up 1.7%, a figure that also topped Street forecasts. Average tickets rose 11.4% $91.72 per trip), compared to a 12.4% growth rate in the final three months of last year. Gross margins narrowed 30 basis points to 33.8%, but fell largely in-line with Street forecasts.

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Looking into the 2022 fiscal year, which ends next January, Home Depot said it sees 'mid single digit' earnings growth, up from its prior forecast of 'low single digit' gains, and comparable sales growth of around 3%.

"Fiscal 2022 is off to a strong start as we delivered the highest first quarter sales in company history," Decker said. "The solid performance in the quarter is even more impressive as we were comparing against last year's historic growth and faced a slower start to spring this year."

"These results are a direct reflection of our associates' continued ability to effectively navigate a challenging and dynamic environment,"
 he added. "I would like to thank them and our many partners for their hard work and dedication to our customers."  

Dow component Home Depot shares were marked 0.4% lower in late-morning trading following the earnings release to change hands at $294.87 each, a move that would leave the stock nursing a year-to-date decline of around 28%. 

"While the guidance includes some benefit from the first quarter upside, what is especially impressive is that a) the prior guidance was issued on February 22, just two days before Russia invaded Ukraine and energy prices spiked and was also ahead of the sharp increase in interest and mortgage rates," said Credit Suisse analyst Dan Oppenheim, who carries an 'outperform' rating with a $450 price target on the stock.

"This is also the first earnings release for Ted Decker as CEO which would likely lead to some conservatism to build credibility, especially in the face of slowing existing home sales and a less-than-certain environment," he added.