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Love this ticker, has treated me very well over the last 15 years as a long term hold. Option chain isn’t overly fluid but, not terrible. I missed out playing last quarter which would’ve paid out very nicely. Definitely interested what people are thinking here.
Site One (SITE), a national landscape supply company has earnings on 2/16 and could give an indication of the general trends in external home maintenance. (Meanwhile Lowe’s has earnings 2/23… not helpful)
General thoughts here are that contractors are still booked 3 months out so there is a backlog of projects to be completed still. Couple that with materials dropping compared to last year, there may be a “second wave” of homeowner projects into the summer. However, I don’t see this backlog lasting through the summer if overall market trends still point towards bearish for the year.
Housing sales seem to have topped off recently with not much buying/selling by me (NYC suburb area), which usually could indicate a lagging trend down in overall renovations.
Not sure what VC or TF was saying on this but interested if people are thinking puts or calls, honestly I can see it going either way short term.
EDIT: SITE has earning premarket 2/16 (not 2/18)
Adding onto some of @DankeDeNada 's points.
-Home Depot seems to be relying on the backlog of projects to support the continued strength of their sales. Interesting to see how strong this backlog to support their results/outlook, especially after an extremely strong Q3 result.
-These projects seem to be a strong cornerstone of their revenue. Total transactions are down while revenue is up, signaling larger purchases. Home Depot also released a new credit card targeted towards their “pro” members, which supports the direction of projects. (The Home Depot Introduces New and Enhanced Credit Options for Pro Customers | The Home Depot)
-They are aware of inflation, but it seems like they aren’t able to do anything about it. Their work around is to focus on strong supplier relationships, which also helps alleviate some supply chain worries/issues. Unfortunately leads to further declining gross margins (Home Depot does have a large problem with continued declining gross margin).
-Historically Q4 earnings are stronger than Q3 due to the holidays and seasonal sales, and interesting enough Home Depot seems to be ramping up seasonal hiring in anticipation for spring (The Home Depot is Hiring More Than 100,000 Associates | The Home Depot).
All in all, I think Home Depot has a great plan moving forward as they focus on what they are strong in (large project purchases). Based on the Q3 earnings transcript, focus on their Pros seem to be increasing as it provides more consistent business and feedback for the company than every day retail customers. The biggest issue would revolve around their gross margin and it’s decline (Home Depot Gross Margin 2010-2023 | HD | MacroTrends).
3 points to look out for I think for earnings. 1) Strength of holiday sales 2) Strength of project backlog/growth of Pro customers/business 3) Gross margin
SITE had a really good earnings this morning, up ~2.3% currently (9:50am EST)
Might indicate calls for HD and potentially a bullish run towards earnings?
#SiteOne Landscape Supply Announces Fourth Quarter And Full Year 2021 Earnings
- Q4 SALES ROSE 19 PERCENT TO $805.2 MILLION
- QTRLY NET INCOME INCREASED TO $27.5 MILLION FROM $11.5 MILLION
Daily Roundup of Key US Economic Data for Feb. 17
MT NEWSWIRES 2:55 PM ET 2/17/2022
02:55 PM EST, 02/17/2022 (MT Newswires) – The highlights of Thursday’s data calendar were a sharp decline in the pace of home construction and an uptick in weekly initial jobless claims.
Housing starts fell by 4.1% to a 1.638 million annual rate in January, compared with expectations for a much smaller decline, with single-family housing starts almost the entire decline. Builders continue to note a tight supply of materials and skilled labor, partially related to the pandemic but possibly longer-lasting in some areas.
Building permits rose by 0.7% to a 1.899 million rate in January as much stronger single-family permits were offset by a decline in multi-family permits. Homes permitted but not started increased by 4.9%, suggesting starts could rebound in the coming months.
The number of homes under construction rose in the month, but completions declined sharply and were well below their level from a year ago.
So there’s clearly a backlog coupled with a shortage but we’re not getting all the cash infusion we had last year so I’m not sure how HD will react to this… SITE has been tracking down since earnings were released…
Thanks for this update!
I’m not too concerned about supply shortages, Home Depot has been working on building out their supply chain and I think have a decent strategy to mitigate supply shortages (not saying they don’t have any shortages, just mitigated).
Backlog is good, but your comment on cash infusion is a bit worrying. Inflation might be a bigger problem since they already have a large gross margin issue, and if inflation ends up impacting sales it could be a big hit on performance.
Long term I’m still bullish, I think they have the right idea/strategy and the right people in place (e.g. new CEO is a 22 year veteran of the company). Earnings will be a complete gamble though, I feel like investors are expecting a strong Q4 relative to Q3, which unfortunately set the bar pretty high. Focus could be more on performance than outlook.