Key Stats for Home Depot Stock
- Price Change for Home Depot stock: 6%
- $HD Share Price as of Nov. 18: $336
- 52-Week High: $440
- $HD Stock Price Target: $426
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What Happened?
Home Depot (HD) stock dropped 6% on Tuesday after the home improvement giant missed earnings expectations for the third straight quarter and cut its full-year profit outlook.
The company posted adjusted earnings of $3.74 per share, falling short of the $3.83 that Wall Street expected, even as revenue of $41.35 billion slightly topped the $41.12 billion estimate.
The real disappointment came from comparable sales, which rose just 0.2% versus expectations for 1.4% growth.
Sales trends worsened as the quarter progressed, with comps up 2% in August, up 0.5% in September, and down 1.5% in October. CEO Ted Decker blamed the deceleration primarily on the lack of storm activity compared to last year’s active hurricane season.
Home Depot now expects full-year sales to climb about 3% with comparable sales slightly positive. That compares to previous guidance for 2.8% sales growth and 1% comp growth. The revised outlook includes an estimated $2 billion from GMS, a building products distributor acquired earlier this year.
Notably, Home Depot expects full-year adjusted earnings per share to decline about 5% from last year, worse than the prior 2% decline forecast.
Net income for the quarter fell to $3.60 billion, or $3.62 per share, from $3.65 billion, or $3.67 per share, in the year-ago period.
CFO Richard McPhail told CNBC the company had anticipated home improvement demand would accelerate in the second half as interest rates and mortgage rates eased.
Instead, “ongoing consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand,” he said.
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What the Market Is Telling Us About Home Depot Stock
The decline in Home Depot stock reflects growing concerns that the home improvement recovery investors have been waiting for may take longer to materialize.
The company has been in what McPhail calls a “deferral mindset” since mid-2023, as homeowners put off major projects due to high mortgage rates and borrowing costs.
Housing turnover, which typically drives larger projects, remains at a 40-year low of just 2.9% of the housing stock.
With less turnover and home prices declining in more markets, the catalyst for increased spending simply isn’t there. McPhail acknowledged that “at this point, it’s hard to identify near-term catalysts that would lead to acceleration.”
Roofing, power generation, and plywood sales all suffered from the absence of hurricane activity compared to last year.
Home Depot doesn’t plan specifically for storms, but there’s always some weather impact in the baseline. This year saw essentially zero storm activity, creating year-over-year pressure that will continue into the fourth quarter.
Despite the sales weakness, Home Depot stock may find some support from signs that the company is taking market share.
Management believes the team is executing at a high level and gaining share even in a tough environment.
When adjusted for storm activity, underlying business comps were essentially flat at about 1% in both Q2 and Q3.
Big-ticket transactions over $1,000 rose 2.3% year over year, driven by success in pro initiatives and managed accounts.
Online sales jumped 11% as faster delivery speeds resonated with customers. The average ticket increased by 1.8%, reflecting customers continuing to trade up for innovative products rather than trading down to cheaper options.
Home Depot continues to invest in its pro strategy to capture more business from contractors and roofers.
Last year’s $18.25 billion acquisition of SRS Distribution and this year’s purchase of GMS aim to build out wholesale capabilities. However, SRS saw its growth expectations cut from mid-single digits to low single digits due to weakness in the roofing market, adding to near-term pressure.
On tariffs, Home Depot has implemented modest price increases while keeping many key items flat or even reducing prices on bestsellers like Christmas trees and lights. More than 50% of inventory is sourced domestically and not subject to tariffs.
For now, Home Depot stock appears stuck in a holding pattern as the company waits for either lower mortgage rates or for consumers to adjust to higher rates as the new normal.
With housing activity remaining depressed and consumer uncertainty elevated, the path to a meaningful recovery remains unclear.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
