Home Depot on the Edge: Earnings Tomorrow Will Reveal If the Housing Slowdown Just Got Worse

Home Depot heads into its third-quarter earnings report Tuesday morning facing a more complicated landscape than at any point in the past year. The company remains the heavyweight bellwether of home improvement and a reliable proxy for consumer resilience, but the backdrop has grown more challenging as high mortgage rates, tariff noise, and choppy spending patterns collide with industry-specific headwinds. The sector has been stuck in a slow-moving reset: small project activity remains healthy, while big-ticket remodels continue to be deferred rather than canceled—a nuance that matters for HD but does little to prevent quarterly volatility. For equity investors, the story is also about price action. Shares have fallen sharply from early September’s $426 to roughly $358 today, slicing through major support levels and leaving the 200-week moving average at $341 as the next line of defense if the company disappoints or guides cautiously.

Expectations for Q3 reflect this cooler environment. Consensus forecasts call for revenue of roughly $41.1 billion, up about 2% to 2.5% year over year. Earnings per share are expected to land between $3.82 and $3.85, essentially unchanged from where most analysts stood at the start of the quarter. JPMorgan, however, trimmed its Q3 U.S. comp expectations to +0.5% versus the Street’s +1.5%, with the total comp pushed to +1% when including the roughly 2% sales lift expected from the recently acquired GMS business. JPM’s EPS estimate sits at $3.82, just below consensus, reflecting a more cautious view on SG&A and about 15 bps of incremental margin pressure tied to the integration of GMS. The range of individual analyst numbers isn’t unusually wide, but the tone has clearly shifted: Q3 is expected to be slow, Q4 estimates are drifting lower, and FY26 expectations are getting shaved down as analysts push out the timeline for large-project recovery.

Guidance will be one of the most important pieces of the release. Management reaffirmed its fiscal 2025 full-year outlook last quarter, calling for total sales growth of about +2.8%, comp growth of roughly +1%, gross margins near 33.4%, and operating margins around 13%. EPS is expected to decline roughly 2% for the year on adjusted basis. That view did not incorporate the pending GMS acquisition nor changes in the rate environment, and investors will want clarity on whether those assumptions still hold. With mortgage rates stabilizing but not falling materially, and with the home improvement category still feeling soft in large-ticket areas, the risk is that HD maintains the top-line view but grows more conservative on margins or discretionary activity through early 2026.

There are several areas investors will be watching most closely. Comparable sales trends matter more this quarter than most, given lingering questions about whether September and October reflected true weakness or simply weather/tough comps. Traffic and ticket dynamics will also be central; last quarter, HD saw positive comps supported by modest ticket gains and resilient small-project activity. Any deterioration in traffic would be a concern, especially with Pro activity still uneven. Tariff impacts will also be scrutinized—management previously downplayed broad price effects, noting that over half of HD’s product assortment is sourced domestically, but select categories may see modest increases. The status of large project R&R (repair & remodel) demand will be a focal point, given that analysts from Piper, Stifel, Citi, and JPMorgan all flagged deferrals as one of the main drags on the category. Digital sales and delivery-speed initiatives, which grew 12% last quarter, will round out the operational lens as investors gauge whether HD continues taking share from smaller players.

Last quarter provides important context. HD delivered Q2 sales of $45.3 billion (+4.9% YoY) with U.S. comps up 1.4% and total comps up 1%. Management called it the “strongest performance in over two years,” driven by stability across small projects, a double-digit lift from faster delivery options, and positive comps in 12 of 16 merchandising departments. Online sales were strong, battery-powered tools hit record levels, and the Pro ecosystem—boosted by the SRS deal—continued gaining traction. Importantly, HD reiterated that large projects remained soft, tied to broad economic uncertainty and the drag from elevated mortgage rates. Inventory levels increased to $24.8 billion, capital spending ran near $915 million, and return on invested capital fell from 31.9% to 27.2% year over year—numbers that suggest both higher cost structure and the heavier capital demands of the expanded ecosystem.

Analyst sentiment heading into the report is mixed, skewing cautious in the near term but constructive further out. JPMorgan trimmed estimates based on slower consumer trends post-back-to-school and softer October activity. Piper expects Q4 and 2026 estimates to come down but sees a favorable setup into early 2026 as large projects inflect. UBS remains bullish long-term, arguing that aging housing stock, rising home equity utilization, and the natural cooling of pandemic pull-forward effects support a multi-year repair-and-replace cycle—even if rates stay elevated. Stifel downgraded HD to Hold, citing a too-challenging setup into late 2025 and a delayed sector recovery. Citi sees Q3 comps roughly in line and EPS slightly above consensus, with a small tailwind from GMS, but also trimmed FY26 outlook.

Taken together, Tuesday morning’s report is arriving at a critical moment for the stock. The technical picture has deteriorated, the macro remains cloudy, and the home improvement category is stuck in transition. But HD has historically executed well, and if comps hold near consensus, digital momentum persists, and November trends improve—as JPMorgan suggests could happen—sentiment could stabilize quickly. If not, the 200-week moving average at $341 may be tested. The stakes are high, and the market will be watching every line of the release for signs of where the home improvement cycle truly stands.