The Home Depot Inc. HD stock has gained 6.1% in the year-to-date period, marking an underperformance from the broader industry’s 8.3% rise. However, it has outperformed the Retail-Wholesale sector and the S&P 500’s growth of 3.1% and 2.8%, respectively.
However, the HD stock has shown remarkable growth compared with its industry peers like Lowe’s Companies Inc. LOW, FGI Industries FGI and Fortune Brands Innovations, Inc.’s FBIN gains of 2.4%, 4.5% and 0.1%, respectively, in the year-to-date period.
HD Stock’s YTD Price Performance
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At the current price of $412.43, the HD stock trades at a discount of 6.1% to its 52-week high of $439.37. The current stock price reflects a 27.4% premium from its 52-week-low mark.
HD trades above its 50 and 200-day moving averages, signaling strong upward momentum and price stability. This technical strength indicates positive market sentiment and confidence in the company's financial health and prospects.
HD Stock Trades Above 50-Day & 200-Day Moving Averages
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What’s Driving HD’s Stock Momentum?
Home Depot has maintained steady growth, leveraging its leadership in the home improvement market, and strategic investments in technology, digital capabilities and supply-chain efficiency under its "One Home Depot" plan. The company's stock rally reflects its strong customer service focus, catering to both Do-it-Yourself (DIY) customers and professional (Pro) contractors, making it a preferred choice for homeowners and industry professionals.
With an extensive store network, diverse product selection and expanding online presence, Home Depot effectively meets rising consumer demand. Its interconnected retail strategy and robust technology infrastructure have significantly boosted web traffic, while continued investments support the development of a comprehensive Pro ecosystem.
Strong inventory management, high employee engagement, and the expansion of online sales and home delivery services are expected to sustain Home Depot’s market share growth. The acquisition of SRS Distribution Inc. has strengthened its position in building material distribution, enhancing its offerings for professional contractors and tradespeople.
Home Depot’s third-quarter fiscal 2024 results reflected a recovery in sales, countering ongoing pressure on consumer demand for high-ticket discretionary items. The acquisition of SRS Distribution played a key role in this performance, contributing significantly to revenues. The fiscal third quarter marked the first full period of SRS sales impacts, with the acquisition projected to generate $6.4 billion in revenues within roughly seven months of Home Depot’s ownership.
For fiscal 2024, HD provided an optimistic sales and earnings outlook, supported by strong year-to-date performance, anticipated hurricane restoration demand, an additional 53rd week and SRS contributions. The company expects a 4% year-over-year sales increase, including a $2.3-billion boost from the extra week and $6.4 billion from SRS. Comparable sales are projected to decline 2.5%, whereas the adjusted earnings per share (EPS) is expected to decrease 1%, with the extra week adding 30 cents per share.
HD’s Upward Estimate Trajectory
Home Depot’s estimates for fiscal 2024 have shown an uptrend in the past seven days. The Zacks Consensus Estimate for HD’s fiscal 2024 earnings per share rose 0.1% in the last seven days. The upward revision in earnings estimates indicates that analysts have continued faith in the company’s growth potential. For fiscal 2025, the Zacks Consensus Estimate for earnings per share declined 0.1% in the last seven days.
For fiscal 2024, the Zacks Consensus Estimate for HD’s sales and earnings implies 4% and 0.1% year-over-year growth, respectively. The consensus mark for fiscal 2025 sales and earnings indicates 3.1% year-over-year growth each.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Can Ongoing Headwinds Derail the Stock?
Home Depot faces challenges across its business due to ongoing macroeconomic headwinds, including higher interest rates and economic uncertainty. These factors have led to softer consumer demand for home improvement projects, particularly in high-ticket discretionary categories. This trend, which began in the first quarter of fiscal 2024, has continued to weigh on the company’s performance in recent quarters.
In the third quarter of fiscal 2024, Home Depot reported a 6.8% year-over-year decline in big-ticket comparable transactions (purchases of more than $1,000). The slowdown was primarily led by weaker demand for large-scale discretionary projects like kitchen and bath remodels, which often rely on financing. The quarter saw a mixed performance, with these headwinds contributing to year-over-year declines in EPS and comparable sales.
Lower customer transaction volumes, particularly in high-value discretionary categories, put additional pressure on comparable sales. While Home Depot continues to see strength in some areas, the overall softness in demand has been a key factor in its recent performance struggles.
Beyond weakened consumer spending, the elevated interest rate environment has also impacted Home Depot’s profitability. The company’s management highlighted that the higher borrowing costs, which emerged at the start of 2024, are likely to persist in the near term, influencing consumer spending behaviors and financial conditions.
HD’s Premium Valuation
With the stock steadily ticking up, the company is currently trading at a forward 12-month P/E multiple of 26.34X, exceeding the industry average of 23.26X and the S&P 500’s average of 22.45X. At current levels, Home Depot’s stock valuation looks expensive.
The premium valuation indicates that investors have high expectations for HD’s performance and growth potential. Investors may be skeptical about buying the stock at these premium levels and may wait for a better entry point.
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Is it Wise to Buy Home Depot Now?
HD is well-positioned for long-term growth, driven by its strong Pro customer base, digital investments and the SRS Distribution acquisition. Its "One Home Depot" plan strengthens omnichannel capabilities, reinforcing market leadership. However, high interest rates, weak big-ticket demand and economic uncertainty continue to pressure sales and profitability in the near term.
Home Depot presents a balanced risk-reward opportunity. While its fiscal 2024 outlook remains optimistic, its premium valuation and macroeconomic headwinds warrant caution. Long-term investors may benefit from holding, as its strategic initiatives and market strength could drive gains. The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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