The Dow’s prime inventory of 2021 is anticipating a powerful 2022

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Shares of House Depot have fallen 16% due to fears about eventual fee hikes from the Federal Reserve hurting the housing market and client spending. Mortgage rates have already began to climb.
Issues of a housing slowdown could also be overblown, nonetheless: House Depot (HD) reported fourth quarter earnings and income Tuesday that topped Wall Avenue’s forecasts, with revenue surging 17% and gross sales at shops open not less than a yr climbing a wholesome 8.1%.

The house enchancment retail large additionally introduced a 15% enhance in its quarterly dividend to shareholders and issued a cautious, however largely upbeat outlook for 2022. House Depot mentioned it expects “barely optimistic” gross sales progress and that earnings will develop within the low single digits.

The inventory was down 5% Tuesday morning, although.

CEO Craig Menear mentioned within the earnings press launch that the 2021 outcomes had been “a testomony to investments now we have made within the enterprise, our potential to execute with agility, and our associates’ relentless give attention to our prospects.”

That is Menear’s final quarter as House Depot CEO. Menear, who has been the top of the corporate since November 2014, is stepping down as CEO on March 1 however will stay chairman. House Depot’s long-time chief working officer, Ted Decker, is succeeding Menear as CEO.
Menear’s tenure was a profitable one for House Depot buyers. The inventory has surged greater than 255% since November 2014, simply outperforming each the S&P 500 (SPX) and a broader index of retail shares (XRT) throughout that point. House Depot did lag rival Lowe’s (LOW), although.
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Lowe’s, which is able to report its newest earnings Wednesday morning, has soared almost 290% since November 2014. Lowe’s, which is now run by former House Depot and JCPenney govt Marvin Ellison, outperformed House Depot barely in 2021, too.

Along with powerful competitors, House Depot additionally has to deal with the influence that inflation and provide chain considerations are having on customers’ wallets. Whereas rising costs for lumber and different housing supplies helps increase gross sales, some customers could begin to pull again on spending due to inflation.

“Demand from common customers is now considerably choppier that it was in the course of the top of the pandemic,” mentioned Neil Saunders, managing director of GlobalData, in a report Tuesday.

“Most individuals are nonetheless pretty dedicated to spending on their houses, however the variety of tasks they wish to undertake and the amount of cash they’re ready to decide to residence enchancment going ahead is much less sure than it was a yr in the past,” Saunders added.

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