Earnings Previews: Home Depot, Tencent Music, Walmart

The three major U.S. equity indexes closed higher — much higher — Thursday. The Dow Jones industrial average ended the day up 3.7%, the S&P 500 closed 5.54% higher, and the Nasdaq saw a 7.35% gain. All 11 sectors closed higher, with technology (8.33%) and real estate (7.75%) posting the biggest gains. Energy (2.22%) trailed the field.

Thursday’s surprisingly good readings on inflation and employment lit a fire under investors. Even Bitcoin was able to bounce off a 52-week low of $15.614.00, despite all the hullabaloo surrounding the implosion of cryptocurrency exchange FTX. The most recent news comes from crypto lender BlockFi, which late Thursday suspended client withdrawals pleading a “lack of clarity” of FTX’s status.

The three major indexes traded higher in Friday’s premarket session.

After U.S. markets closed Thursday, Aurora Cannabis reported revenue that beat the consensus estimate and a narrower-than-expected loss per share. The stock added more than 8% in Thursday trading and traded essentially flat in Friday’s premarket.

Toast’s net loss per share was larger than expected, but revenue easily beat expectations. Shares added nearly 19% in Thursday’s get-well trading session and traded up another 11% early Friday.

There are no notable earnings reports due out Friday or Monday. Here is a look at three companies, including two Dow components, on deck to report results before U.S. markets open on Tuesday.

Home Depot

Home Depot Inc. (NYSE: HD) has dropped more than 15% from its share price over the past 12 months. Since posting its 52-week high in early December last year, the stock has dropped by about 24%. The home improvement giant beat back the first-ever attempt at unionizing the big-box retailer’s Philadelphia location. More than 200 employees voted by a 3-to-1 margin to reject unionization.

Shares jumped nearly 9% on Thursday following the CPI report. Investors likely are not expecting much from the third quarter, and the fourth quarter ending in January is typically the company’s slowest. Any good news would be welcome.

Of 33 analysts covering the stock, 23 have a Buy or Strong Buy rating and nine rate the shares at Hold. At a recent price of around $311.70 a share, the upside potential based on a median price target of $350.00 is 12.3%. At the high price target of $470.00, the upside potential is 50.8%.

Analysts expect Home Depot to report third-quarter revenue of $37.88 billion, which would be down 13.5% sequentially buy 2.9% higher year over year. Adjusted earnings per share (EPS) are forecast at $4.11, down 18.6% sequentially and up 4.8% year over year. For the full 2023 fiscal year ending in January, EPS are forecast at $16.59, up 6.9%, on sales of $156.63 billion, up about 3.6% year over year.

Home Depot stock trades at 18.8 times expected 2023 EPS, 18.1 times estimated 2024 earnings of $17.26 and 17.1 times estimated 2025 earnings of $18.28 per share. The stock’s 52-week trading range is $264.51 to $420.61. The Dow component pays an annual dividend of $7.60 (yield of 2.65%). Total shareholder return for the past year is negative 13.5%.

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