Home Depot, one of the largest home improvement retailers in the US, is expected to report its fiscal first-quarter 2023 earnings results on Tuesday before market open. According to analysts, the company is likely to experience a decline in year-over-year revenue, earnings, and same-store sales as the boom in consumer spending on home improvement caused by the pandemic softens. Additionally, unfavorable weather in March and April and a pullback in consumer spending in March are also expected to affect the company's results.


Analysts predict that Home Depot's revenue will decline by 1.5% to $38.34 billion from a year ago, while adjusted earnings per share will fall 7.1% to $3.80 per share. The company's same-store sales are also expected to drop by 1.42%, with US same-store sales falling by 2.14%. Furthermore, customer transactions are likely to decline by 5.36% compared to last year, although higher inflation may drive up average ticket sizes by 2.63%.


Credit Suisse expects near-term headwinds that could keep demand for home improvement under pressure. The firm also believes that moderation in inflation through 2023 and deflationary commodity categories, such as lumber, may reduce the growth in home improvement. In addition, transactions are expected to continue seeing year-over-year declines through 2023 as project backlogs normalize, moving closer to 2019 levels or below.


Moreover, Credit Suisse anticipates that consumers are becoming more cautious with their spending on big-ticket discretionary purchases, such as floor replacements. This could be reflected in Home Depot's earnings results. Year-to-date, the company's shares are down nearly 9%, while the S&P 500 has risen by almost 8%. Despite this, Home Depot's shares have gained more than 30% compared to March 2020.


As of Monday, Wall Street has 23 Buys, 14 Holds, and 2 Sells on the street. It remains to be seen how Home Depot's earnings results will affect its stock performance, but the company faces challenging headwinds in the near term, as consumer spending on home improvement slows down and inflation moderates.