Home Depot Q1 Earnings Preview: Tariffs, Mortgage Comments, How Consumers Are 'Changing Their Spending Habits'

Home improvement retailer The Home Depot HD could be a gauge for the do-it-yourself growth in the era of high home prices and mortgage rates when the company reports first-quarter financial results Tuesday before market open.

Here are the earnings estimates, what experts are saying ahead of the report, and the key items to watch for.

Earnings Estimates: Analysts expect the company to report first-quarter revenue of $39.33 billion, up from $36.42 billion in last year's first quarter, according to data from Benzinga Pro.

The company has beaten analyst estimates for revenue in two straight quarters and six of the last 10 quarters overall.

Analysts expect the company to report first-quarter earnings per share of $3.60, down from $3.63 in last year's first quarter. The company has beaten analyst estimates for earnings per share in more than 10 straight quarters overall.

What Experts Are Saying: While Home Depot showed signs of improvement in April, the delay of the Spring season could lead to lower comparable sales, JPMorgan analyst Christopher Horvers said in a recent investor note.

The analyst reiterated an Overweight rating on Home Depot and lowered the price target from $470 to $410.

Horvers is cautious on the company's gross margins for the quarter, while seeing positives like inventory shrink likely coming in the report.

The analyst said macro economic uncertainty will also likely weigh on higher-ticket spending in the report and the future. Horvers said the home improvement retailer will likely keep its guidance in place and revisit things after the second quarter report.

Freedom Capital Markets Chief Global Strategist Jay Woods said Home Depot's report comes as the stock has struggled year-to-date.

"Home Depot results will give a peek at how the DIY home retail investor is changing their spending habits," Woods said in a weekly newsletter.

Woods said investors will be looking to see if Home Depot revises its guidance given higher interest rates and economic challenges.

Goldman Sachs analyst Kate McShane has a Buy rating on Home Depot and $421 price target ahead of the report.

The analyst said the company won't be widely impacted by tariffs in the short term, with most of its imported goods being seasonal and spring merchandise already in inventory at stores.

In the past, Home Depot helped offset tariff impacts by sourcing alternative items and adjusting operations, McShane said in the note.

The analyst highlighted Home Depot's management commentary about home buyers likely sidelined with rates in the 6% to 6.5% range.

Here are other analyst ratings on Home Depot and their price targets:

Wells Fargo: Maintained Overweight rating, lowered price target from $445 to $420
Truist: Maintained Buy rating, raised price target from $391 to $393
Morgan Stanley: Maintained Overweight rating, lowered price target from $450 to $410

Key Items to Watch: Tariffs will likely be one of the biggest topics to watch for, as many retailers have commented on what the impact of higher import prices could mean. Given the potential impact of tariffs and macroeconomic concerns, guidance will be closely watched.

Home Depot CEO Ted Decker was among the retail CEOs who met with President Donald Trump to share concerns about the impact tariffs could have on the sector.

Investors and analysts will be watching to see if Home Depot can maintain its momentum from the fourth quarter. In the fourth quarter, sales were up 14.1% year over year, and customer transactions were up 7.6% year over year.

A recent Placer.ai report indicates that Home Depot saw fewer visits during the first quarter. The report said visits to Home Depot fell 3.8% in the first quarter on a year-over-year basis. The report showed visits down 2.3%, 9.2% and 0.7% in the months of January, February and March respectively.

Visits were down 1.8% year-over-year in April, which could factor into second-quarter and full-year guidance. Placer.ai said the good news is that last year's peak weekly visits came in mid-May, which could be a sign of optimism for the current quarter.

Home Depot's report comes one day before rival Lowe's Companies LOW, which reports on Wednesday. The report from Home Depot could make Lowe's shares volatile as they operate in the same sector and could indicate what's to come in Lowe's report.

The Dow Jones Industrial Average could also be volatile following Home Depot's report. Home Depot is one of the 30 components of the closely watched market index. Since the Dow Jones is price-weighted, Home Depot is one of the larger components and currently the third largest weighting (5.5%) of the SPDR Dow Jones Industrial Average ETF Trust DIA.

Higher mortgage rates have often helped home improvement retailers, as they lead to more do-it-yourself home projects and spending money on existing homes rather than buying a new one.

HD Price Action: Home Depot stock trades at $379.91 Monday versus a 52-week trading range of $323.77 to $439.37. Home Depot stock is down 2.2% year-to-date and up 12.5% over the last year, outpacing a 4.5% year-to-date decline and 2.8% one-year gain for rival Lowe's.

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