Home Depot (HD) Stock Forecast & Price Target

Home Depot has consistently outperformed its primary competitor, Lowe's, in terms of sales and earnings growth, allowing it to maintain a premium valuation within the home improvement retail sector. The ongoing increase in home prices, which have risen for 19 consecutive months and remain substantially higher than pre-pandemic levels, along with expected sales boosts from favorable commodities and tariffs, positions the company well for future growth. In addition, positive comparable sales growth and transaction increases in the latter part of 2024 suggest a recovering trajectory for Home Depot, enhancing its outlook as the home improvement market approaches normalization despite current housing market uncertainties.

Home Depot is facing a negative outlook due to a projected decline in adjusted EBIT margins, anticipated to be 13.4%, which reflects a decrease of 30 basis points year-over-year and is influenced by factors such as sales deleverage and a negative mix shift from its recent acquisition of SRS. Additionally, gross margins decreased by 25 basis points year-over-year, largely due to a significant drop in lumber prices and a decline in housing affordability, which has adversely impacted homebuilding demand. The forecasted adjusted diluted EPS is expected to decline approximately 2% from $15.24 in FY24 to around $14.94, compounded by a higher-than-expected tax rate, thereby highlighting ongoing financial pressures.