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 third quarters before the market open on Tuesday, November 12, and Tuesday, November 19, respectively. Home Depot’s conference call is scheduled for 9:00 am EDT on Tuesday and Lowe’s will hold its quarterly call the following Tuesday at 9:00 am EDT. What to watch for:

HOUSING MARKET COMMENTARY: Builder confidence in the market for newly built single-family homes was 43 in October, up two points from a reading of 41 in September, according to the National Association of Home Builders/Wells Fargo Housing Market Index released on October 17. “While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “The wild card for the outlook remains the election, and with housing policy a top tier issue for candidates, policymakers should be focused on supply-side solutions to the housing crisis.”

OUTLOOK: In August, Home Depot forecast fiscal 2024 adjusted EPS down 1%-3% and revenue up 2.5%-3.5%, compared to its previous view calling for EPS up 1% and revenue up 1%. The company lowered its FY24 comparable sales view to down 3%-4% from down 1%. The company said it updated its fiscal 2024 guidance, which includes 53 weeks of operating results, to reflect the performance in the first half of fiscal 2024 and include SRS. The current EPS consensus is $14.84, while the revenue consensus is $157.33B. At the time, Home Depot also lowered its gross margin view to 33.5% from 33.9% and its operating margin rate to 13.5%-13.6% from 14.1%. Barclays said Home Depot’s Q2 report was weak as expected, with guidance lowered, but that the company’s outlook “now seems fully reset.”

Also in August, Lowe’s lowered its FY24 adjusted EPS view to $11.70-$11.90 from $12.00-$12.30 and its revenue view to $82.7B-$83.2B from $84B-$85B. Lowe’s also lowered its comparable sales view to down 3.5%-4% from down 2%-3%. The company said, “Based on lower-than-expected DIY sales and a pressured macroeconomic environment, the company is updating its outlook for the operating results of full year 2024.” Analysts currently expect EPS of $11.81 and revenue of $82.95B. BofA expects Lowe’s to provide additional updates on its strategic initiatives at its December analyst day, including Pro initiatives, localization, rural stores, and the PPI pipeline.

According to Truist Card Data, Q3 is shaping up better than Q2. Loop Capital said recent store checks indicate the home improvement retail demand has bottomed. The hurricanes may disrupt current quarter sales, but investors will likely look beyond this to a future demand lift, the analyst said. Stifel said that while it is approaching FY24 with increased confidence, it remains below consensus for both Home Depot and Lowe’s given its caution around the amplitude of the category recovery. Stifel said it does not expect Home Depot or Lowe’s to provide FY25 guidance during Q3 earnings, but expects any commentary to be cautious with Lowe’s potentially providing more extensive commentary at its December investor day.

CONFIDENCE IN RETURN TO SOLID GROWTH: Telsey Advisory upgraded Lowe’s to Outperform from Market Perform with a price target of $305, up from $275, ahead of the quarterly report. The firm has increased confidence in the company returning to solid sales and earnings growth in 2025 and beyond, “with a number of recently heightened catalysts for the business,” including Federal Reserve rate cuts, hurricane recovery, and easier comparisons. These catalysts should be well capitalized by Lowe’s, especially with further market share gains given the company’s “Total Home Strategy,” including enhancing digital, driving localization, and elevating the assortment, the analyst told investors in a research note.

Telsey also upgraded Home Depot to Outperform from Market Perform with a price target of $455, up from $360. The firm now projects a return to outperformance for the shares relative to the S&P 500 over the next year. It expects further market share gains given Home Depots “best-in-class execution and digital prowess.” Further, the company has a “significant opportunity” to grow its Pro business by better serving complex pro customers, particularly with the acquisition of SRS Distribution, the analyst said.

‘LESS WORSE’: JPMorgan believes the home improvement industry “is getting less worse,” with some extended fall season help to outdoor categories, while the hurricanes are expected to add to comp upside. JPMorgan increased Q3 same-store-sales for both Home Depot and Lowe’s. TD Cowen also thinks Home Depot and Lowe’s are well-positioned ahead of the next Home Improvement cycle, which should result in solid market share growth.

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