TheStreet
Home Depot beats Q2 earnings but warns of weak sales ahead
Home Depot surpassed earnings expectations for the second quarter but warned of potential weaker sales ahead, citing ongoing challenges from higher interest rates and a tough consumer environment.
For the quarter ended July 28, the company earned $4.6 a share, topping the $4.49 per share expected by Wall Street analysts. Revenue came in at $43.18 billion, beating the $43.06 billion forecast.
Roughly half of Home Depot’s sales come from home professionals, while the other half comes from do-it-yourself (DIY) customers, with around 90% of those DIY shoppers being homeowners, CNBC reported.
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“There is certainly a direct relationship between decreases in mortgage rates and the amount of activity that you at least see picking up in turnover,” said chief finance officer Richard McPhail during the company’s earnings call in August.
Home prices remain high due to a shortage of affordable homes and record-high mortgage rates. McPhail said in a CNBC interview that homeowners are putting off moving into new houses or issuing financing projects due to high rates.
Middleburg Communities’s chief economist, Brad Case, said the Fed’s rate cuts would not fix the housing market’s problems, according to Yahoo Finance.
“The basic problem with single-family, owner-occupied housing is just that it’s way too expensive. It is overvalued to the extent that it was back in 2006 before house prices crashed,” Case said.
Analyst adjusts Home Depot stock price target before Fed’s rate cut decision
Loop Capital analyst Laura Champine raised Home Depot’s stock price target to $360 from $330 on Sept. 17 and maintained a hold rating.
The analyst is adjusting its estimates to reflect a “more reasonable view” of the company’s recently acquired SRS Distribution’s growth potential, according to a research note pulled by thefly.com.
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The analyst also notes that Home Depot’s 2025 same-store sales forecast has been adjusted from a 1% decline to a 2% increase.
The reason? Interest rates could fall by the second half of 2025, helping boost growth from the current low demand.
Home Depot stock closed at $383.24 on Sept. 17.
The Fed is set to cut its key interest rate on Sept. 18, the first rate cut since the beginning of the Covid-19 pandemic.
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