Weekly Earnings Review: November 13, 2023- November 17,2023

Stocks continued to rise as investors are optimistic that The Fed is likely done raising rates. The inflation data came in better than expected thanks to lower gasoline prices. It does show that the interest rates are effective in curbing inflation. The yields on bonds have started to fall from peaks, as interest rates look to be paused for a while. There is a lot of optimism that interest rate cuts could start coming a lot sooner than previously anticipated. We look to be entering into a Santa Claus type of rally. However, based on historical data, stocks have performed really well during periods in which The Fed pauses. 

Tuesday, November 14, 2023

Home Depot (HD)- 

    Home Depot saw its stock shoot up after reporting earnings. The company missed on the top line but beat on the bottom line. The revenue and EPS both saw declines from last years numbers. Home Depot has expressed that customer engagement has continued with smaller projects. However, the pressure is coming from the big-ticket items. The volume of transactions saw a 2.4% dip and the average ticket price saw a 0.3% dip. The US Comp Sales also saw a slump of 3.5%. The company continues to reward shareholders, but it is starting to get a little worrisome. Home Depot continues to have high debt levels on its balance sheet and with the high interest rates, this could potentially hinder the earnings for the company. I am not too worried about this, but for the sake of longevity, I would maybe like to see them start paying down a bit more of their debt instead of rewarding billions to shareholders. The prices of certain items have significantly decreased (lumber) which is another reason that the company has seen earnings deteriorate a bit. Overall, the company is alright. I would just like to see capital deployment change to strengthen, not weaken, the balance sheet. 

Wednesday, November 15, 2023

Target (TGT)-

    Target saw a significant increase to their share price after reporting earnings. The company beat on the top and bottom line. Sales slumped down 5%, but profitability caught the investors eye. Earnings per share grew from $0.39 to $1.80. One of the key factors to a successful quarter for the company, was a reduction on the discretionary inventories. The impact of reducing inventories allows the company to adapt and respond to top-line trends faster. Target also sees the shrinkage problem improving, which is also helping boost the bottom line. Although the sales were down, we are still seeing a stronger balance sheet and earnings starting to come back. I like that Target is taking control of fixing the shrinkage problem and I look for them to continue this momentum into the year-end. Target has a long way to go in the retail sector though, its competitors are growing top lines and seem to be making some significant investments. It almost seems as if Target may be falling a tad bit behind in relation to its competitors. I will be keeping a close on this one and may switch to a competitor if valuation allows. 





Thank you for reading!

Disclaimer: This is not advice to buy or sell stocks based on my recommendations, this advice is very opinionated and interpretive of facts presented in earnings.

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