Home Depot Q1 2025 Earnings Preview: Tariffs, Housing Headwinds, and Hopes for a Spring Rebound

Home Depot (HD) will report first-quarter earnings before the bell on Tuesday, May 20, with investors closely watching whether the home improvement retailer can navigate growing macroeconomic headwinds. Among the top issues: tariffs that threaten to raise costs and pressure margins, and a persistently sluggish housing market that continues to weigh on big-ticket renovation projects. While demand for core categories like building materials and appliances has remained resilient, larger discretionary purchases—such as kitchen and bath remodels—are feeling the squeeze from elevated mortgage rates and deteriorating consumer sentiment.

Analyst Expectations: Muted but Hopeful

Wall Street consensus estimates call for Q1 EPS of $3.59, representing a modest year-over-year decline of 1.1%. Revenue is expected to grow 8% to $39.33 billion, supported in part by the contribution from the SRS Distribution acquisition completed in June 2024. Analysts expect comparable sales to fall slightly, by about 0.5%, with Evercore ISI and Citi modeling a mild sequential improvement heading into the spring season.

Several analysts expect HD to reaffirm its full-year guidance of a 2% EPS decline (or ~$14.95), with comparable sales expected to rise 1%. The view is that Home Depot's relative scale, strong Pro customer base, and pricing power leave it better positioned than competitors like Lowe’s, which faces more uncertainty in its forecast and has higher exposure to discretionary categories.

Q4 2024 in Review: A Foundation for Recovery

Home Depot's previous quarter gave investors reasons for cautious optimism. EPS of $3.13 beat expectations and was up from $2.86 the prior year. Revenue for the quarter came in at $39.7 billion, rising 14% year-over-year. Comp sales grew 0.8%, with U.S. stores performing slightly better at 1.3%. Still, full-year EPS was essentially flat at $15.24, and margins came under pressure: operating margin fell to 11.3% in Q4 from 11.9% a year ago, and the company forecast a 2% EPS decline for fiscal 2025.

Key metrics to monitor in Q1 include customer transactions (expected at 390.8 million vs. 386.8 million YoY) and average ticket size (projected at $91.74, up from $90.68). Analysts will also watch for any updates on store expansion—HD finished FY24 with 2,347 stores and plans to open 13 more in FY25.

Tariffs in Focus: A Manageable Risk?

Rising tariff costs remain a swing factor for the quarter and the broader outlook. Roughly one-quarter of Home Depot’s imports come from China, and while the company is better positioned than some peers—thanks to its scale and pricing strategy— near-term disruptions could still hit margins. HD’s pricing model allows for real-time adjustments with suppliers, but visibility into future inflation pressures remains limited. Expect management to address this during the earnings call, especially in light of recent White House announcements on tariff enforcement.

Valuation and Stock Action: Holding the Line

Home Depot shares have declined roughly 4% year-to-date, underperforming the broader S&P 500. At $378, the stock trades at about 25x forward earnings—above its historical average and notably higher than Lowe’s, which trades at a discount despite offering slightly higher expected EPS growth. Analysts remain generally constructive, with an average 12-month price target of $429.71, implying around 13.6% upside. Citi and RBC are both optimistic that reaffirmed guidance and improving spring trends could drive shares back toward $400, a level last seen in January.

Investor Sentiment and Strategic Focus

The good news is that professional customers—who account for roughly half of HD’s revenue—remain loyal and slightly more optimistic than DIY consumers. A recent contractor survey by KeyBanc showed that 78% of Pros prefer Home Depot over Lowe’s, citing superior revenue visibility and in-store support.

Meanwhile, HD’s investments in delivery speed, omnichannel integration, and Pro desk enhancements continue to pay dividends. Management has emphasized that any near-term volatility is not deterring its long-term strategy, which includes modest store expansion, continued supply chain optimization, and reinforcing its dominant Pro business.

A Test of Resilience

Tuesday’s report will be a test of how well Home Depot is weathering the twin challenges of inflation and soft housing turnover. While expectations are measured, the tone of management’s commentary—particularly around the spring selling season, tariffs, and housing trends—could determine whether the stock continues its recovery or sees further pressure. A meet-and-maintain quarter may be enough to reassure the market, but investors looking for a breakout will need signs of a more robust consumer backdrop later in the year.