Home Depot Q2 Earnings Beat Estimates as Sales & Ticket Rise

The Home Depot, Inc. HD has delivered solid second-quarter fiscal 2026 results, with the top and bottom lines surpassing the Zacks Consensus Estimate. Adjusted earnings were $4.92 per share, up 5.1% year over year from $4.68. The figure topped the Zacks Consensus Estimate of $4.71.

Net sales rose 5.7% year over year to $47.86 billion and beat the consensus mark of $47.46 billion. Comparable sales (comps) increased 1.7%, while the comparable average ticket climbed 2.8% and comparable customer transactions declined 1.0%. Our model predicted consolidated comps growth of 1.5% for the fiscal second quarter.

This Zacks Rank #3 (Hold) company’s shares have rallied 11.7% in the past three months compared with the industry’s 10.3% growth.

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HD's Comparable Sales Gain as Ticket Rises

U.S. comparable sales advanced 1.3% year over year in the fiscal second quarter. The gain came as customer spending per transaction increased, while comparable transaction volume remained below the prior-year level.

Total customer transactions were 443.2 million, down 0.8% year over year, while average ticket increased to $92.50 from $90.01. Management noted that demand was broad-based with customers continuing to engage in smaller projects.

Home Depot's Gross Profit Expands

Gross profit increased 6.5% year over year to $16.12 billion from $15.13 billion, supported by the higher sales. Cost of sales rose 5.3% to $31.75 billion, a slower pace than the increase in net sales, which aided the gross margin.

The gross margin expanded about 30 basis points (bps) to 33.7% from 33.4%, based on the reported sales and gross-profit figures. The spread between sales growth and cost-of-sales growth supported the year-over-year margin improvement. Our model predicted a 60-bps year-over-year decline in the gross margin to 32.8% for the fiscal second quarter.

HD's Operating Costs Rise Faster Than Sales

Selling, general and administrative (SG&A) expenses increased 8.5% year over year to $8.42 billion. Depreciation and amortization rose 5.7% to $852 million, while total operating expenses climbed 8.2% to $9.28 billion. Expense growth outpaced the pace of revenue expansion.

GAAP operating income increased 4.3% to $6.84 billion, but the operating margin slipped 20 bps to 14.3% from 14.5% in the year-ago quarter. Adjusted operating income rose 4.8% to $7.02 billion, while the adjusted operating margin edged down 10 bps to 14.7% from 14.8% in the year-ago quarter.

Our model predicted the SG&A expense rate to increase 20 bps year over year to 17.3%. We anticipated the adjusted operating income to drop 0.2% year over year and the operating margin to contract 70 bps to 14.1% for the fiscal second quarter.

Home Depot's Balance Sheet & Cash Flow

HD ended second-quarter fiscal 2026 with cash and cash equivalents of $2.09 billion, up from $1.39 billion at the start of fiscal 2026. Merchandise inventories were $26.85 billion, receivables were $6.96 billion and long-term debt, excluding current installments, stood at $43.95 billion. Stockholders' equity was $16.62 billion.

For the first six months of fiscal 2026, net cash provided by operating activities was $11.42 billion, up from $8.97 billion a year earlier. Working-capital changes contributed $570 million compared with a $1.82 billion use in the prior-year period. Capital expenditure totaled $1.72 billion, while payments for acquired businesses, net, were $1.33 billion.

Cash dividends totaled $4.64 billion for the first six months of fiscal 2026. The company also repaid $3.04 billion in long-term debt, contributing to $7.70 billion in net cash used in financing activities.

HD Reaffirms FY26 Outlook

Management reaffirmed its fiscal 2026 outlook, calling for total sales growth of 2.5-4.5% and comps growth of flat to 2%. The company also expects 15 new stores and capital expenditure of 2.5% of the total sales.

For fiscal 2026, Home Depot projects a gross margin of 33.1% and an operating margin of 12.4-12.6%, with an adjusted operating margin of 12.8-13%.

The company anticipates earnings per share to be flat to up 4% from $14.23 in the year-ago quarter. Meanwhile, adjusted earnings per share are also projected to be flat to up 4% from the $14.69 reported in the year-ago quarter.

The outlook also assumes an effective tax rate of 24.3% and net interest expenses of $2.3 billion. Guidance includes IEEPA tariff refunds, which are expected to partially offset unplanned fuel, energy and other product input costs. Adjusted earnings guidance excludes an expected after-tax impact of about 50 cents per share from acquired intangible asset amortization.

Key Picks in the Retail Space

Alliance Laundry Holdings Inc. ALH, which is the world's largest designer and manufacturer of commercial laundry systems, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

The Zacks Consensus Estimate for Alliance Laundry’s current financial-year sales and EPS indicates growth of 6.7% and 28.4%, respectively, from the year-ago reported numbers. ALH delivered a trailing four-quarter earnings surprise of 19.7%, on average.

Dollar Tree Inc. DLTR is an operator of discount variety stores offering a broad assortment of everyday consumables and discretionary merchandise. The company currently carries a Zacks Rank of 2. 

The Zacks Consensus Estimate for Dollar Tree’s current financial-year sales and EPS indicates growth of 6.5% and 21.7%, respectively, from the year-ago reported numbers. DLTR delivered a trailing four-quarter earnings surprise of 32.1%, on average.

Dollar General Corporation DG is one of the largest discount retailers in the United States, selling low-priced merchandise, typically $10 or less. The company currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for Dollar General’s current financial-year sales and EPS is expected to rise 3.9% and 7.6%, respectively, from the year-ago reported figures. DG delivered a trailing four-quarter earnings surprise of 21%, on average.

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