Walmart Vs. Home Depot: Which Stock Is The Better Buy Ahead Of Q4 Earnings?

Retailers Walmart Inc WMT and Home Depot Inc HD are both set to report their fourth-quarter earnings on Feb. 20.

Wall Street expects Walmart to report $1.63 in EPS and $170.23 billion in revenue. Market expectations from Home Depot are set at $2.76 EPS and $34.63 billion in revenue.

While Walmart positions itself as the one-stop shop catering to a variety of consumer needs, Home Depot specializes specifically in home improvement and construction products tailored for DIY projects and construction professionals. Besides their basic positioning, the two retail giants also differ in store format, customer base, strategic focus, and their respective stock valuation.

Let’s look into each briefly to figure out which is a better buy right now.

Store Format & Customer Base

Walmart’s formats include supercenters for comprehensive shopping at a discount. Accordingly, its customer base encompasses families, budget-conscious shoppers and those seeking everyday essentials at competitive prices.

On the other hand, Home Depot operates large warehouse-style stores in mainly suburban areas with an extensive selection of home improvement products. Its primary customers are homeowners, contractors and DIY enthusiasts.

Strategic Focus

Walmart strategically emphasizes low prices, convenience and an extensive product assortment to appeal to a broad customer base. The company has made substantial investments in e-commerce to remain competitive in the digital retail landscape.

Conversely, Home Depot strategically focuses on delivering specialized and comprehensive home improvement offerings. It prioritizes customer service, product knowledge and assistance for DIY projects, establishing a niche in the home improvement sector.

Valuation

Over the past year, Walmart stock gained 18% while Home Depot stock is up about 13%.

Data compiled from Yahoo Finance

Accordingly, Walmart stock’s P/E is ahead of Home Depot stock’s trailing and forward P/E. On a PEG ratio basis, Walmart stock appears to offer better value relative to Home Depot stock.

Let’s look at what Wall Street consensus thinks about these two retail stocks.

Data compiled from Yahoo Finance

Both Walmart and Home Depot stocks appear to be trading at prices ahead of their intrinsic value. As such, analysts reviewing the stock do not see an upside with either of the two stocks.

But, with Walmart stock there are events lined up that could potentially stir the stock over the short term:

• Walmart is in talks with VIZIO Holding Corp VZIO to take it over for $2 billion.
• Walmart is expected to split on Feb. 26 with a ratio of 3:1.
• Fourth quarter 2024 earnings are scheduled to be released on Feb. 20 before the market open.

On the other hand, the slump in housing starts could spell bad news for Home Depot.

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