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Surging Earnings Estimates Signal Upside for Home Depot (HD) Stock

Home Depot (HD) could be a solid choice for investors given the company's remarkably improving earnings outlook. While the stock has been a strong performer lately, this trend might continue since analysts are still raising their earnings estimates for the company.

Analysts' growing optimism on the earnings prospects of this home-improvement retailer is driving estimates higher, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Home Depot, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

Current-Quarter Estimate Revisions

The company is expected to earn $3.20 per share for the current quarter, which represents a year-over-year change of +16.79%.

Over the last 30 days, nine estimates have moved higher for Home Depot compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 12.78%.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $15.42 per share, representing a year-over-year change of +28.18%.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, 12 estimates have moved up for Home Depot versus no negative revisions. This has pushed the consensus estimate 6.33% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, Home Depot currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

While strong estimate revisions for Home Depot have attracted decent investments and pushed the stock 10.1% higher over the past four weeks, further upside may still be left in the stock. So, you may consider adding it to your portfolio right away.


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