Home Depot Stock Falls After the Company Cut Its Earnings Outlook. Here's What Investors Need to Know.

Home Depot (NYSE: HD) published its third-quarter results before the market opened this morning, and investors are reacting negatively to the print. While sales for the quarter came in above the market's expectations, the company's adjusted earnings per share fell short of Wall Street's forecast.

Nullifying the potential positive impact from the company's Q3 sales beat, the company lowered its full-year same-store sales and earnings forecasts. As of 1:30 p.m. ET, the company's share price was down 4.3%. At the same point in the day's trading, the S&P 500 had fallen 0.2%.

Image source: Home Depot.

Home Depot stock slips on mixed Q3 results and lowered guidance

For the third quarter, Home Depot reported non-GAAP (adjusted) earnings per share of $3.74 on sales of $41.35. The average analyst estimate, as polled by LSEG, had called for the business to post adjusted earnings of $3.84 per share on sales of $41.1 billion. Same-store sales nudged 0.1% higher year over year, and the company's average ticket price increased 2%.

Overall revenue was up 2.8% year over year in the period, but the gains were driven by new store openings and higher average tickets amid softening consumer traffic. Same-store transactions declined 1.6% year over year last quarter, and total customer transactions declined 1.4%.

In response to trends the company saw emerging last quarter, Home Depot revised its guidance. The company now expects annual revenue growth to come in at roughly 3% -- ahead of its previous forecast for growth of 2.8%. On the other hand, the average analyst estimate had targeted annual sales growth of approximately 3.2% for the year.

Making matters worse, the company had previously guided for annual same-store sales growth of 1% -- but it now expects growth to be only "slightly positive" compared to last year. Meanwhile, adjusted earnings per share are now projected to decline 5% year over year. The company had previously modeled for an annual decline of 2%, but the average Wall Street analyst was more optimistic and called for growth of approximately 0.6%.

Home Depot had based its previous guidance on the assumption that performance would be stronger in the second half of the year thanks to lower interest rates and mortgage rates. Unfortunately, consumer aversion to spending in the current environment and ongoing pressures in the housing market led to demand being weaker than previously anticipated.

As the country's leading improvement retailer, Home Depot's results are also often looked to as a bellwether for the health of the U.S. economy -- and its disappointing fiscal Q3 results and guidance are likely playing a role in the broader market's volatility today.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool has a disclosure policy.