Home Depot (HD) Q4 Earnings: Will it Top Estimates Again?

The Home Depot Inc.HD is slated to report fourth-quarter fiscal 2016 results on Feb 21, before the opening bell. Last quarter, the company delivered a positive earnings surprise of 1.3%, retaining its four-year-long trend of posting earnings beat.

In the trailing four quarters, the company has outperformed estimates with an average beat of 3.9%. Let's see how things are shaping up for this announcement.

Home Depot, Inc. (The) Price and EPS Surprise

Home Depot, Inc. (The) Price and EPS Surprise | Home Depot, Inc. (The) Quote

Factors Influencing This Quarter

Persistent housing market recovery, focus on improving customer experience, efforts to develop its eCommerce network and solid execution are the primary reasons behind Home Depot's splendid performance traditionally. Evidently, the company's shares have witnessed a fantastic growth of 20.3% in the past one year, outperforming the Zacks categorized Building Products - Retail/Wholesale industry which observed an increase of 15.8% in the same period.

The company's inherent strength and sturdy performance in third-quarter 2016 encouraged management to raise earnings growth guidance for fiscal 2016. Home Depot envisions diluted earnings per share to grow about 15.9% year over year compared with $6.33 earned in fiscal 2015. Previously, the company had forecast earnings per share growth of 15.6% year over year.

Moreover, Home Depot remains focused on developing merchandising tools and increasing investment in eCommerce to boost top-line growth and enhance market share. Further, it is on track to achieve long-term dividend payout, share repurchase and return on investment targets, given its disciplined capital allocation strategy.

However, intense competition and a soft economic recovery may prove deterrents, pushing back home improvement projects. Further, the company's significant exposure to international markets makes it vulnerable to adverse currency fluctuations, posing a concern. Thus, we are not sure if this home improvement retailer can sustain its spectacular trend this time around.

Earnings Whispers

Our proven model does not conclusively show that Home Depot is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:

Zacks ESP: Home Depot currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.32. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Home Depot's Zacks Rank #3 (Hold) increases the predictive power of ESP. However, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks that Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Dean Foods Co. DF , scheduled to report earnings on Feb 16, currently has an Earnings ESP of +2.44% and a Zacks Rank #3.

Costco Wholesale Corp. COST , slated to report earnings on Mar 2, currently has an Earnings ESP of +0.74% and a Zacks Rank #3.

Dollar Tree Inc. DLTR , expected to release earnings on Mar 7, has an Earnings ESP of +0.75% and a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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