Home Depot Earnings Are Coming. Look for Its Postpandemic Prospects.

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Home Depot will report earnings on Tuesday morning, and all eyes will be on the bellwether home improvement company. The pandemic, which has now passed its two-year mark, sent everyone into nesting mode, but investors will be keen to know if management sees momentum continuing as much of the world starts to reopen.

Analysts are looking for

Home Depot

(ticker: HD) to earn $3.69 a share, compared with $3.86 in the year-ago period, on sales of $36.7 billion, which would be another slight decline from the first quarter of last year, when it notched $37.5 billion in revenue.

It’s not surprising that consensus calls for a deceleration in Home Depot’s top- and bottom-line. Last year was huge for home improvement companies, given a white-hot housing market, and ongoing waves of Covid-19 variants, both of which kept consumers spending on their living spaces.

Yet even the biggest bulls know that those record levels weren’t sustainable as we return to a more normal environment—although it’s worth noting that for the full year, analysts still expect Home Depot’s earnings per share and revenue will top both 2020 and 2021 results.

That said, expectations are fairly mixed for the quarter, as a chilly spring for much of the country coincided with a chilling effect from higher interest rates, which have pushed up the price of mortgages—meaning already high home prices are even more expensive for borrowers.

Still, as Barron’s noted, home improvement retail doesn’t necessarily have to trade in tandem with the housing market, given that the sector has other catalysts at its back.

Foot traffic has at least held up relatively well compared with prepandemic times. According to data compiled for Barron’s from Placer.ai, visits were positive for seven of the 12 weeks from roughly the start of February through April 18—the most recent available—compared with the same week in 2019. The last four of those weeks were down between 4.3% and 6.6%, but that may be down to the fact that 2019 was a more normalized environment, when the typical spring spike in demand held sway.

Still, investors are most concerned with Home Depot’s postpandemic prospects, given worries about shrinking housing affordability, pulled-forward demand, and rising inflation. That means, like so many retailers this earnings season, the company’s forecast may be the biggest factor in terms of stock performance.

Fellow retail giant

Walmart

(WMT) will also report Tuesday, providing more insight into how the consumer is fairing.

Write to Teresa Rivas at teresa.rivas@barrons.com