Home Depot (HD -0.44%) is scheduled to report fiscal 2021 fourth-quarter earnings on Feb. 22. The company has done an excellent job fulfilling the surging demand for home improvement.
A public that has grown accustomed to spending most of its time at home takes on projects to make that time more enjoyable and productive. Shareholders worried that as economies reopened, it could cause a sharp reversal in sales at Home Depot. So far, that has not yet materialized. Still, investors will keep a close eye on consumer trends and management's expectations for 2022 when Home Depot reports Q4 earnings.
Rising prevalence of remote work could fuel revenue growth for Home Depot
In its third and most recent quarter ended in October, Home Depot reported sales growth of 9.8%. That's impressive considering it came on top of 23% growth in the same period last year. Even the muted growth in 2021 is above Home Depot's compounded annual rate of 6.9% in the previous decade. Several macroeconomic factors continue to work in Home Depot's favor, including rising home prices, high prevalence of remote work, and limited inventory of homes for sale.
Remote work is not a new phenomenon; a small percentage of folks worked from home even before the pandemic. However, the pandemic turbocharged this trend. It started as a temporary change to help slow the spread of COVID-19. Most workers favored the shift as it removed commuting, saving time and expenses. Employers were surprised at how productive organizations were working remotely, and many have chosen to extend the option long-term. How does that work in Home Depot's favor?
Folks working from home typically need a dedicated office and accompanying furniture. Some people had existing space they could modify. Others are required to build an addition to their home to accommodate work. Of course, some of these shoppers found their way to Home Depot, the largest home improvement retailer in the U.S. It remains to be seen how prevalent remote work will be in the aftermath of COVID-19. One thing is likely -- that it will be higher than before the outbreak. Moreover, hundreds of thousands of people are testing positive for COVID-19 daily in the U.S., so the end of the pandemic seems distant still.
Those, among other factors, could mean another strong year for Home Depot in 2022. Rival Lowe's has already forecast sales to remain elevated, albeit decreasing slightly in the new year. When Home Depot reports Q4 earnings, investors will want to see what it sees from customer demand in 2022.
What this could mean for Home Depot investors
Analysts on Wall Street expect Home Depot to report revenue of $34.8 billion and earnings per share (EPS) of $3.18. If it meets those projections, it would be increases of 7.90% and 20%, respectively, from the same period the year before.
Despite expectations for robust growth in sales and earnings in Q4, Home Depot's stock is down 14% year to date in 2022. The market could be anticipating the favorable macroeconomic factors that have supported Home Depot's sales, and earnings will reverse in the near term. Whether or not that scenario comes to fruition remains to be seen. Meanwhile, Home Depot continues to deliver quarter after quarter of robust growth.