Home Depot Earnings Preview: What to Expect from Q4 Results

Home Depot is set to report its fourth-quarter earnings before the market opens on Tuesday, February 20. Analysts expect earnings per share of $3.04, reflecting a 7.8 percent year-over-year increase, while revenue is projected to reach $39.15 billion, up 12.6 percent from the prior year. Investors will be closely watching key metrics such as same-store sales, which are expected to decline by approximately 2.0 percent, as well as trends in average ticket size and inventory levels.

The earnings report comes amid a backdrop of macroeconomic uncertainty, including high mortgage rates, inflationary pressures, and softer home improvement spending. Despite these challenges, analysts believe Home Depot’s performance could demonstrate early signs of recovery in the home improvement sector, with some projecting sequential improvement in sales trends heading into 2025.

Key Metrics and Drivers

Several key factors will be under scrutiny in Home Depot’s earnings report.

Same-store sales are expected to decline by around 2.0 percent, but some analysts believe there is potential for an upside surprise. Citi suggests the market is anticipating a better-than-expected print, with investors pricing in a possible 1 percent same-store sales gain.

Inventory levels will be an important factor, as any commentary on normalization will help gauge how the company is managing supply chain imbalances.

Macroeconomic pressures continue to weigh on consumer behavior. Higher interest rates and inflation have impacted discretionary spending, and Home Depot’s management commentary on demand trends will be key for setting expectations moving forward.

Seasonal demand trends may provide some tailwinds, particularly in sales linked to hurricane and wildfire rebuilding efforts, as well as seasonal holiday items.

Guidance for fiscal 2025 will be a focal point, as investors look for signals on how Home Depot expects demand to trend if macroeconomic conditions improve.

Analyst Expectations and Market Sentiment

Analysts hold a mixed but cautiously optimistic stance on Home Depot’s fourth-quarter results.

Bernstein expects comparable sales to remain negative in the quarter but sees a return to growth in fiscal 2025, forecasting a 1 percent gain over the year. However, they do not expect a meaningful rebound to the historical 4 percent growth range until fiscal 2026.

Citi has raised its estimates for Home Depot, citing better-than-expected high-frequency data. They now forecast same-store sales of 1 percent, compared to the sell-side consensus of a 2.2 percent decline.

UBS believes results from both Home Depot and Lowe’s will provide evidence that the home improvement market is stabilizing. They note that temporary factors such as rebuilding activity are helping bridge the gap to stronger demand trends. If sales remain sluggish, UBS sees this as a case of demand deferral rather than destruction, meaning a sharper recovery could occur once macro conditions improve.

Truist has also raised its comparable sales forecast for Home Depot from negative 2.0 percent to positive 0.5 percent, citing internal credit card data showing stronger spending trends.

JPMorgan recently added Home Depot to its Analyst Focus List, raising its price target from $450 to $475. They also revised their U.S. comparable store sales forecast from a decline of 2.4 percent to a gain of 1.0 percent, suggesting potential for an upside surprise.

Home Depot vs. Lowe’s: Comparing Valuations and Expectations

Home Depot’s primary competitor, Lowe’s, is set to report earnings the following day, on Wednesday, February 21. Both retailers have faced sluggish stock performance amid concerns over consumer spending, but analysts believe their earnings reports will provide more clarity on whether the sector is stabilizing.

Same-store sales expectations differ for the two companies. Home Depot is expected to post a 2.0 percent decline, while Lowe’s is projected to decline by 3.0 percent. However, Citi believes Lowe’s could surprise with a flat to negative 0.5 percent same-store sales result, signaling potential upside.

Valuations reflect Home Depot’s stronger market position, as it trades at a higher multiple than Lowe’s. Home Depot’s forward price-to-earnings ratio stands around 25.8 times projected GAAP earnings, while Lowe’s trades closer to 18 to 19 times forward earnings.

Market preference has leaned toward Home Depot over Lowe’s, with several analysts, including Citi, favoring Home Depot due to its superior execution, stable market share, and stronger professional customer base. However, Evercore ISI recently added Lowe’s to its Tactical Outperform List, arguing that the stock has more room to run if the company reaffirms its guidance.

What to Watch Post-Earnings

Forward guidance will be a key focal point. If Home Depot provides a stronger-than-expected outlook, it could signal that the home improvement sector is starting to recover. Analysts currently expect full-year 2025 earnings per share growth of 3.5 percent and revenue growth of 3.3 percent, so any deviations from this guidance will likely impact stock performance.

Market reaction will also be important to watch. Home Depot shares recently found support around their 200-day moving average, and a strong earnings report could provide momentum. Conversely, a weak print could lead to further downside pressure.

The impact on Lowe’s will also be in focus. Since Lowe’s reports earnings the day after Home Depot, its stock could react in advance based on Home Depot’s results. If Home Depot shows signs of stabilization, it could set the tone for a more favorable reaction to Lowe’s earnings.

Final Thoughts

Home Depot’s earnings report will serve as a key indicator for the broader home improvement sector, offering insights into consumer spending trends and the trajectory of housing-related demand. While expectations for the quarter remain modest, early signs of stabilization could set the stage for a gradual recovery in fiscal 2025.

With both Home Depot and Lowe’s trading near key technical levels, investors will be paying close attention to guidance updates, macro commentary, and potential upside surprises. While risks remain, particularly with inflation and mortgage rates still elevated, analysts see reasons to be constructive on home improvement stocks if demand trends continue to improve.