Home Depot's Price Forecasts For 2024 Lowered By Analysts Amid Modest Sales Growth, Cite Weaker Consumer Outlook

Home Depot, Inc. HD shares are trading higher today. Several analysts cut the price target and lowered the estimates after second quarter FY24 earnings results reported yesterday.

Yesterday, Home Depot reported second-quarter sales growth of 0.6% year-over-year to $43.175 billion, marginally missing the consensus estimate of $43.376 billion and adjusted EPS of $4.67 (-0.2% Y/Y), beating the consensus of $4.50.

For FY24, Home Depot raised its sales guidance from $154.20 billion to $156.49 billion – $158.01 billion vs. the consensus of $158.88 billion and, expects comparable sales to decline between 3% and 4% (prior ~1%).

Stifel analyst W. Andrew Carter maintained a Hold rating and cut the price target to $375 from $380.

The analyst lowered FY24 EPS estimate to $14.81 from $14.94, reflecting the upper end of the company's updated guidance. This adjustment accounts for a $0.30 EPS headwind from acquired amortization.

The analyst projects a 3% decline in comparable sales and expects a 10 basis point increase in gross margin. Operating margin is estimated at 13.6%, down 60 basis points year-over-year, but improved by $500 million in OPEX favorability.

RBC Capital Markets analyst Steven Shemesh reiterated the Sector Perform rating with a reduced price target to $363.0 from $377.0.

The anticipated comp miss and guidance revision set up a better outlook for FY’25, assuming a lower interest rate environment, writes the analyst. However, they revised the estimates due to a weaker consumer outlook and the impact of the SRS acquisition and now forecast FY24 comp sales at -3.4% and FY25 at +1.5%, with adjusted EPS of $14.71 for FY24 and $15.13 for FY25.

KeyBanc analyst Bradley B. Thomas maintained a Sector Weight rating due to expected negative sales growth and spending headwinds.

The analyst writes that they view HD as less vulnerable to e-commerce threats compared to peers in the near term and well-positioned for future investments. The analyst lowered EPS estimates to $3.61 for the third quarter and $2.90 for the fourth quarter, reducing 2024 EPS to $14.80 and 2025 EPS to $15.30.

BofA Securities analyst Robert F. Ohmes reiterated a Buy rating with a price target of $425.

The analyst revised the FY25 EPS estimate to $15.00 (from $15.15) due to a reduced second-half comp forecast (-3.3% vs. -0.5%) and the partial-year impact of the SRS acquisition.

Despite mixed pressure from the acquisition, Ohmes expects HD’s base business gross margin to benefit from lower transportation costs, reduced shrink, and cost-cutting measures.

JP Morgan analyst Christopher Horvers slashed the price target to $395 from $400 and reaffirmed an Overweight rating.

The analyst writes that August trends have improved from a weak July, aligning with a -3% annual comp forecast, suggesting a possible down 2% trend given seasonal effects. While there is potential for 2H upside, historical trends suggest that easier comparisons may not significantly boost performance.

The analyst projects a -2% to -2.5% same-store sales decline for the second half in the U.S. and -2.9% for FY24, with a recovery to 2.4% in FY25. Horvers anticipate a peak-to-trough re-rating before focusing on 2025 performance, influenced by current trends and Fed actions.

Truist Securities analyst Scot Ciccarelli reduced the price target to $395 from $396 and kept the Buy rating.

The analyst cut the 2024 and 2025 EPS estimates to $14.95 (from $15.10) and $15.40 (from $15.70), respectively, and introduced a 2026 estimate of $16.75.

Related: Home Depot Analysts Cut Their Forecasts Following Q2 Results

Investors can gain exposure to the stock via iShares U.S. Consumer Focused ETF IEDI and SPDR Select Sector Fund – Consumer Discretionary XLY.

Price Action: HD shares are up 2.71% at $359.55 at the last check Wednesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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