Should You Buy-the-Dip at Home Depot?

Home Depot (NYSE:HD) is the largest DIY retailer in the United States. Its stock has been a high performer over the past decade. Shares have achieved average annual returns of 24% over the past 10 years as of close on November 25.

The stock has increased 29% in 2019 so far. Home Depot reduced its financial forecasts for the second time this year after releasing its third quarter 2019 results.

Adjusted earnings per share beat expectations in the third quarter and came in at $2.53. However, revenues disappointed and were reported at $27.22 billion, while same-store sales growth slowed to 3.6%.

CEO Craig Menear said that some of its investments would take longer to pay off than originally anticipated. This was one of the main reasons its same-store sales growth targets slipped in Q3 and were not expected to meet targets for the full year. Management reiterated that the backdrop for home improvement has remained strong.

Home Depot needs to strengthen its digital offerings going forward. Its B2B website still requires underlying technical work. Roughly 45% of its business comes from its professional customers, which far outpaces its stiffest competitor Lowe’s. It needs to beef up its technical side and it should have no issue maintaining this advantage.

Shares are still trading at the high end of its 52-week range. Home Depot last paid out a quarterly dividend of $1.36 per share, representing a 2.5% yield. The stock is not discounted, but it comes at a more attractive price after its downward adjustment.