Home Depot Earnings Preview – Analyst Raises Stock PT (NYSE:HD) Leading In

Home Depot (NYSE:HD) prepares to release its next set of earnings this morning before the opening bell, with markets  watching closely. HD's stock closed out the final session leading in at $394.70, down 1.17% on the day, yet holding on to green territory YTD (+1.61%).

Three has been plenty of caution surrounding HD, as the housing market, tariff impacts, and consumer spending has placed the company in the midst of a volatile trading environment. It should come of little surprise then to have seen Home Depot underperform since the turn of the year.

The street is looking for an EPS of $4.69 for the upcoming quarter, a steady improvement on the $4.60 printed in the same period Y/Y. Revenue is also expected to have grown 4.94% to $45.31B.

Looking to the the previous quarter for clues, Home Depot reported an EPS of $3.56, slightly below the estimate of $3.60, resulting in a -0.99% surprise. This miss highlights the difficulty in accurately forecasting the company's performance in the current environment.

The company's first-quarter fiscal 2025 earnings, released in May, revealed a mixed picture. While sales increased by 9.4% year-over-year to $39.9 billion, comparable sales saw a slight decrease of 0.3%, with U.S. comparable sales edging up by only 0.2%. Net earnings also declined, from $3.6 billion ($3.63 per diluted share) to $3.4 billion ($3.45 per diluted share). CEO Ted Decker noted continued customer engagement in smaller projects and spring events, suggesting a shift in consumer behavior towards smaller, more manageable home improvements.

Home Depot reaffirmed its fiscal 2025 guidance, projecting a 2.8% sales growth and a 1% increase in comparable sales for the 52-week period. The company's ability to achieve these targets will depend on its success in navigating the current economic challenges and executing its strategic initiatives.

Several factors are weighing on Home Depot's performance. The U.S. housing market recovery remains sluggish, with high interest rates deterring potential buyers and homeowners from undertaking large-scale renovation projects. Ongoing tariffs on imported goods are also squeezing profit margins, forcing the company to find ways to mitigate these costs. Cautious consumer spending, driven by economic uncertainty, further adds to the challenges.

Building material and garden supply retailers have experienced a notable slowdown, with sales dropping by at least 4% year-over-year from May to July, a stark contrast to the broader retail sector's growth. This divergence underscores the specific challenges facing the home improvement industry.

Price Targets

Despite these headwinds, analysts maintain a consensus “Strong Buy” rating for Home Depot, with an average price target of $424.13, suggesting a potential upside of 7.5% from the current price. This optimism is based on the company's strong brand presence, pricing power, and strategic initiatives to strengthen its professional contractor segment, invest in its supply chain, and diversify its sourcing to mitigate tariff impacts.

With HD earnings soon upon us, the latest analyst revision from Stifel beat the print in, with a raised price target to $432 (was $425) coming alongside a note that indicated valuation was “back to levels we believe more appropriately values the medium-term prospects and long-term advantages,”.