Here’s what Wall Street is saying about Home Depot, Lowe’s ahead of earnings

Home improvement retailers Home Depot (HD) and Lowe’s (LOW) are scheduled to report results of their fourth quarters before the market open on Tuesday, February 25, and Wednesday, February 26, respectively. Home Depot’s conference call is scheduled for 9:00 am EDT on Tuesday and Lowe’s will hold its quarterly call on Wednesday at 9:00 am EDT. What to watch for:

HOUSING MARKET COMMENTARY: Builder sentiment fell sharply in February over concerns on tariffs, elevated mortgage rates and high housing costs. Builder confidence in the market for newly built single-family homes was 42 in February, down five points from January and the lowest level in five months, according to the National Association of Home Builders/Wells Fargo Housing Market Index released on February 18. “While builders hold out hope for pro-development policies, particularly for regulatory reform, policy uncertainty and cost factors created a reset for 2025 expectations in the most recent HMI,” said NAHB Chairman Carl Harris. “Uncertainty on the tariff front helped push builders’ expectations for future sales volume down to the lowest level since December 2023. Incentive use may also be weakening as a sales strategy as elevated interest rates reduce the pool of eligible home buyers.”

OUTLOOK: In November, Home Depot narrowed its fiscal 2024 adjusted EPS view to down 1% from down 1%-3% and raised its revenue view for the year to up 4% from up 2.5%-3.5%. Home Depot also raised its comparable sales view to down 2.5% from down 3%-4%. The company said, “The company updated its fiscal 2024 guidance, which includes 53 weeks of operating results.” The current EPS consensus is $15.16, while the revenue consensus is $150.01B. Building blocks are in place for a return to second half of the year growth, but with 2025 Street comps of 1.6% and positive low single digits EPS growth, Wells Fargo sees little reason for Home Depot to raise the 2025 bar.

At its December investor day event, Lowe’s backed its fiscal 2024 adjusted EPS view of $11.80-$11.90 and revenue view of $83B-$83.5B. Lowe’s also backed its comparable sales view of down 3%-3.5%. At the time, Lowe’s said “The company has developed a framework to harness the new power of generative AI through a standardized development process, designed to enhance the customer experience and unlock productivity. The company is now piloting new solutions to empower frontline associates to better serve customers and improve the in-store shopping experience.” Analysts currently expect EPS of $11.92 and revenue of $83.4B.

Bernstein continues to expect negative comparable sales growth for both Home Depot and Lowe’s in Q4 but expects comparable sales to start to turn positive in fiscal 2025. Compared to buy side consensus, Bernstein is more cautious around how quickly home improvement demand will recover. Given policy uncertainties and a potentially higher rate for a longer environment, the firm doesn’t expect a meaningful rebound in Home Depot’s and Lowe’s comp sales growth to the 3.5%-4% range until FY26. The firm said in January that it expects renewed inflationary pressure on the back of potential tariffs and wage inflation in 2025, which is a net positive for mass/club retailers, a net neutral for dollar retailers as consumers’ need to trade down is offset by higher labor costs, and a net negative for home improvement retailers as this could dampen the rate cut outlook. Historical evidence suggests that mass/club retailers generally see accelerated comp sales growth but experience gross margin pressure to a varying degree in inflationary periods.

TRUIST CARD DATA: Based on the latest Truist Card Data, the firm boosted its comp forecast for Home Depot to up 0.5% from down 2%, and for Lowe’s to down 1% from down 2%, noting that solid momentum has continued in Q4 from Q3, the analyst told investors in a research note. The combination of consumer adjustments to the current inflation/interest rate environment, the digestion of pull forward demand and the continued rise in home equity values provide homeowners with material “dry powder” to accelerate investments into their homes, the firm added.

‘TACTICAL OUTPERFORM,’ FOCUS LIST: Evercore ISI added Lowe’s to the firm’s “Tactical Outperform List” while keeping an In Line rating on the shares with a $290 price target into the Q4 report. Reaffirming guidance around the company’s 1% comp base case from December’s analyst day will be well received by investors “given the wall of worries” around higher rates, slipping pending home sales, and a “plethora” of macro uncertainties, the analyst tells investors in a research note. Evercore believes expectations have come down enough for the risk to tilt towards the upside on the stock.

Meanwhile, JPMorgan added Home Depot shares to its Analyst Focus List. JPMorgan increased Home Depot’s Q4 U.S. comp estimate to +1%, above the Street’s negative 2.4% expectation, based on its data and channel work. Home Depot is benefiting from solid west coast and high-end housing trends and share of wallet normalization, the analyst tells investors in a research note.

SENTIMENT: Check out recent Media Buzz Sentiment for Home Depot and Lowe’s as measured by TipRanks.