Home Depot Outshines Lowe’s in Q1: A Data-Driven Case for Resilience in Home Improvement

The home improvement sector faces headwinds—soaring interest rates, inflation, and a cooling housing market—but not all players are faltering. In the latest earnings showdown, Home Depot (HD) delivered an 8% revenue surge, while Lowe’s (LOW) reported a 4.1% comparable sales decline. The divergence underscores a critical investing theme: operational resilience and predictive analytics like Zacks’ Earnings ESP and Zacks Rank can separate winners from losers in tough markets. Here’s why Home Depot is the buy, and Lowe’s is a risk to avoid.

The Sector’s Crossroads: Home Depot Thrives, Lowe’s Stumbles

Home Depot’s Q1 2025 revenue hit $39.3 billion, an 8% year-over-year jump, driven by Pro customer growth, supply-chain efficiency, and its “One Home Depot” omnichannel strategy. The company beat consensus estimates, with EPS rising to $3.13—despite a projected 3% full-year diluted EPS decline due to amortization costs.

Lowe’s, however, posted a 4.1% decline in comparable sales, with big-ticket DIY categories (appliances, kitchen projects) down 7.6%. While Pro sales grew and spring seasonal demand held up, the company’s reliance on discretionary spending left it vulnerable to macro pressures. Analysts had already turned cautious: Zacks’ Earnings ESP for Lowe’s sat at -0.43%, signaling bearish revisions, while its Zacks Rank of #3 (Hold) reinforced uncertainty.

Leveraging Zacks’ Metrics: Why Home Depot’s Resilience Matters

Zacks’ Earnings ESP gauges whether a stock is likely to beat or miss estimates, while the Zacks Rank (1-5) reflects overall valuation and momentum. Here’s how they stack up:

• Home Depot: Despite a modest EPS decline (due to non-operational factors), its Zacks Rank #2 (Buy) reflects strong earnings momentum and upside potential. Even with a negative ESP signal (a result of aggressive estimates), the company consistently exceeded expectations—beating EPS in 4 of the last 5 quarters. This highlights a disconnect between Wall Street’s skepticism and operational reality.
• Lowe’s: Its negative ESP and neutral Zacks Rank signal a high miss risk. Analysts have slashed forecasts, and the company’s six consecutive quarters of negative comparable sales suggest structural challenges.

The takeaway? Home Depot’s execution is overriding model pessimism, while Lowe’s struggles to regain traction.

Why Buy Home Depot Now?

1. Pro Customer Dominance: Pro sales (40% of Home Depot’s business) grow at twice the DIY rate, offering higher margins and stability. Lowe’s Pro segment, while growing, remains smaller and less profitable.
2. Target’s Implied Optimism: Target’s strong Q1 results, driven by home categories, signal that consumer demand for home improvement isn’t dead—just shifting toward essentials and professional projects.
3. Valuation and Guidance: Home Depot’s stock surged 3% post-earnings, yet its forward P/E of 18.5 remains reasonable. Even with 2025’s 2.8% revenue growth guidance, its “One Home Depot” strategy positions it to capture market share.

Why Avoid Lowe’s?

• Weak DIY Exposure: Lowe’s is overly tied to discretionary spending, which is fading as inflation and rates persist.
• Unclear Turnaround: Despite Pro growth and AI investments (e.g., an AI-powered marketplace), Lowe’s has no clear path to reverse six straight quarters of declining comparable sales.
• Bearish Sentiment: Zacks’ metrics and analyst downgrades suggest the stock is priced for disappointment, with no catalyst to justify its current valuation.

Final Call: Buy Home Depot, Avoid Lowe’s

The home improvement sector is bifurcating. Home Depot’s strategic agility and Pro-focused model make it a defensive play in a slowing economy. Even with near-term EPS headwinds, its revenue resilience and Zacks Rank #2 justify a buy.

Lowe’s, meanwhile, faces a toxic combination of structural issues and negative sentiment. Investors should steer clear until it proves it can stabilize its core business.

Action Item: Buy Home Depot (HD) at current levels. Monitor for a potential reacceleration in DIY demand or a macro rebound to add to Lowe’s—but don’t hold your breath.

Invest with conviction in companies that master the chaos.