Home Depot Stock Drops 1.92% Amid High Interest Rates

On April 7, 2025, The Home Depot's stock dropped 1.92% in pre-market trading.

The Home Depot, a leading home improvement retailer, has faced several challenges that have impacted its stock performance. The company's growth has been hindered by high interest rates, which have reduced consumer spending. The home improvement industry is particularly sensitive to changes in the housing market, and the current environment of high housing prices and mortgage rates has left less room for home improvement projects.

In its latest earnings call, The Home Depot discussed the challenging macro environment due to high interest rates and low housing turnover. Despite management's optimism about consumer resilience, the company's guidance suggests that the downturn is far from over, with total sales growth forecast at just 2.8% and a 2% decline in adjusted diluted earnings per share. This marks the third consecutive year of little to no growth for The Home Depot.

However, The Home Depot has made strategic moves to position itself for future growth. In June, the company completed its $18.25 billion acquisition of SRS Distribution, a building products distributor with a strong presence in the professional contractor market. This acquisition diversifies The Home Depot's reach and provides additional revenue streams. Management expects SRS' organic sales to grow by mid-single digits in fiscal 2025, outperforming the overall business.

The full impact of the SRS acquisition is expected to be felt in the next expansion period, demonstrating The Home Depot's financial health and long-term focus. The company has also been prudent with its dividend, raising it by just 2.2% in the most recent increase, the lowest in 15 years. This cautious approach helps manage the dividend during a slowdown and ensures the company's financial stability.

Despite the challenges, The Home Depot remains a strong business with a reasonable 24.3 price-to-earnings ratio and a 2.5% dividend yield. The company's strategic acquisitions and focus on long-term growth make it a compelling choice for long-term investors who believe in a recovery in the housing market. The Home Depot's stock may be a coiled spring for economic growth, and its recent acquisition of SRS could prove to be a brilliant move in diversifying its business and improving its exposure to the professional market.