Home Depot $HD, the home improvement retail behemoth, reported a double beat and rallied nearly 3%.
It was an excellent report, but our retail expert, Jeff Macke, has pointed out one big problem. The housing market sucks right now.
What stood out to him from the conference call was this: "The higher interest rate environment continues to pressure larger remodeling projects."
The management team also said, "Our customer is very healthy... as they stay in their houses longer, they will take on larger remodeling projects as opposed to moving [but not yet]."
There will come a time when we want to be super long the stock, but that's not today.
The bottom line is that HD is a great American company, and its shareholders have been fabulously rewarded. The stock is up over 1,000,000% since it went public in 1981.
It's one of the best stocks ever.
For now, though, there are too many headwinds against this stock. Until the market proves us wrong, we expect the price to continue churning sideways.
Let's talk about what else happened 👇
Here are the latest earnings reactions from the S&P 500:
*click the image to enlarge it
As you can see, American Tower $AMT had the best reaction score on Tuesday, and Sempra had the worst.
The stock with the largest market capitalization was Home Depot $HD and the smallest was Henry Schein $HSIC.
Public Service Enterprise Group $PEG and Diamondback Energy $FANG beat the market's expectations but couldn't rally.
Now, let's dig into the data and talk about the most significant earnings reactions 👇
AMT had its best earnings reaction since Q4 2023:
American Tower reported a double beat and rallied over 6%. Its reaction score was 4.36.
The management team also provided the guidance the market wanted to hear. It was great.
As you can see on the chart, the last time the stock had a very positive earnings reaction (Q3 2023), the price continued higher for months. We think that could happen again.
If AMT is above the VWAP anchored to the 2024 peak (currently around 203), the path of least resistance points higher.
HD had its best earnings reaction since Q4 2023:
As you can see, the last time Home Depot had a great earnings reaction like this, the stock rallied for multiple months.
While that could happen again, we don't think the odds favor it. As we discussed earlier, there are too many headwinds against this company right now.
Until HD can close above 420, we expect the stock to continue trading in a range.
SRE had its worst earnings reaction ever:
Sempra reported a double miss and fell nearly 20%. Its reaction score was a shockingly negative -10.
The company has faced several regulatory challenges regarding its California operations, negatively impacting its bottom line.
In addition, they announced delays in key infrastructure projects. Not good!
To add fuel to the fire, they lowered the guidance for 2025.
This report was a complete disaster. Congratulations to any bears who were on the right side of this move. 🐻
We expect SRE to trend lower for the foreseeable future.
