Home Depot Earnings Preview: Consumer Health and Tariffs in Focus

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Home Depot (NYSE:HD) will report fiscal second-quarter 2025 results tomorrow morning before the opening bell, offering one of the most important reads on U.S. consumer health, housing, and broader retail sentiment. Shares recently broke above the $400 level, though some profit-taking has emerged ahead of the report, with the 200-day moving average near $382 sitting as key technical support. The results will not only highlight the state of discretionary and Pro spending, but also set the tone for peer Lowe’s (NYSE:LOW), which follows later this week. In a macro backdrop marked by easing rate expectations, sticky inflation, and tariff uncertainty, investors are looking to Home Depot for signs of resilience—or cracks—in consumer demand.

Expectations and Analyst Commentary Consensus calls for second-quarter revenues of $45.5 billion, up 5.4% year-over-year, and adjusted earnings per share (EPS) of $4.71, representing 0.9% growth from last year. Comparable sales are expected to rise roughly +1.4%, with RBC’s latest channel checks suggesting comps closer to +1.2%, slightly under consensus but in line with buy-side positioning around +0.5–1.0%. Analysts see gross margin around 33.2%, down about 20bps from last year, reflecting SRS Distribution integration costs, partly offset by lower shrink and productivity gains. SG&A is expected to deleverage modestly to 16.5% of sales, weighed by payroll costs.

While near-term comps are mixed, Stifel, Citi, and UBS all highlight HD as better positioned than Lowe’s, especially given its entrenched leadership in the complex Pro segment. Stifel reiterated its Buy rating, noting Home Depot is “a key beneficiary” of eventual above-trend housing recovery. Citi likewise prefers HD, citing stronger same-store sales and SRS integration, while expressing caution on Lowe’s, where DIY weakness remains a drag.

Guidance remains the next key watchpoint. RBC expects full-year 2025 guidance (2.8% sales growth, +1% comps) to be reaffirmed, though the Street is attuned to risks from tariffs and inflation elasticity. Analysts widely believe HD’s 2025 guide is realistic, if cautious, given tougher 2H compares.

M&A Activity: Spotlight on GMS Adding intrigue, Home Depot confirmed that its SRS Distribution unit has entered an agreement to acquire building-products distributor GMS (NYSE:GMS) for $110 per share in cash, valuing the equity at $4.3 billion and enterprise value at roughly $5.5 billion. The deal, which comes days after QXO made a competing unsolicited bid, is expected to be accretive to EPS in the first year, excluding synergies. RBC does not anticipate antitrust hurdles, given the fragmented wallboard market split between residential and commercial. The potential bidding war underscores HD’s push to scale distribution and strengthen its Pro contractor ecosystem.

Q1 Recap: Momentum with Caveats In Q1, Home Depot delivered $39.9 billion in revenue, up 9.4% year-on-year, but slightly below expectations as comps slipped 0.3% (U.S. comps +0.2%). Adjusted EPS came in at $3.56, down from $3.67 last year, impacted by higher SG&A as legal benefits rolled off. Gross margin was 33.8%, down 35bps y/y, while operating margin stood at 12.9%. Strength was seen across appliances, plumbing, garden, electrical, and building materials, with big-ticket comps over $1,000 up 0.3%. Pro demand held firm, though management noted a lack of large, financing-driven projects given still-elevated interest rates.

Management reiterated FY25 guidance, projecting sales growth of 2.8%, comps of +1%, gross margin around 33.4%, and adjusted EPS down ~2% versus 2024 (flat on a 52-week basis). CEO Ted Decker highlighted sourcing diversification efforts to blunt tariff risks, with plans to ensure no country outside the U.S. accounts for more than 10% of purchases within a year.

Key Metrics to Watch Tomorrow

• Comparable Sales (Comps): Consensus +1.4%, RBC +1.2%, with focus on June pull-forward and July softness.
• Gross Margin: Expected at 33.2% (-20bps y/y), with SRS integration partially offset by productivity gains.
• Guidance: FY25 sales +2.8%, comps +1% likely reaffirmed; investors bracing for any tariff commentary.
• Pro vs. DIY Trends: Pro demand expected to remain steadier; DIY weakness persists across the sector.
• M&A: GMS acquisition could be a catalyst depending on competitive dynamics.

Industry Read-Throughs and Peers Lowe’s reports later this week, with consensus more cautious given DIY exposure and integration of ADG. RBC and Citi expect LOW to lag HD, both on comps and margin performance. Beyond retail peers, appliance pricing trends, lumber inflation, and durable goods indicators remain key demand drivers. With HD representing a core holding in over 400 ETFs, tomorrow’s results will ripple broadly across market indices and retail investor portfolios.

Technical Setup Shares of HD have rallied past $400, reflecting optimism around rates and housing demand stabilization, but profit-taking has set in. The $382 level (200-day MA) looms as critical support. An in-line print may not move the stock meaningfully, but upside surprises on comps or guidance could re-ignite momentum, while downside risks could pressure shares back toward support.

Bottom Line Expectations for HD are muted but constructive heading into Tuesday’s release. The Street anticipates modest comp growth, reaffirmed guidance, and cautious commentary on tariffs and inflation. Pro strength, sourcing diversification, and SRS expansion should help offset lingering DIY softness and macro uncertainty. With valuation premium intact and investor sentiment still cautious, Home Depot has a chance to reset the narrative—and reassert its leadership in retail and housing—when it opens the earnings season for big-box home improvement.