The Home Depot, Inc. (HD), headquartered in Atlanta, Georgia, is the world’s largest home improvement specialty retailer with more than 2,300 stores across North America. Valued at $350.94 billion by market cap, the company offers a diverse range of branded and proprietary home improvement items, building materials, lawn and garden products, décor products, and related services. It functions through a network of distribution and fulfillment centers and a number of e-commerce websites.

Shares of this leading home improvement retailer have underperformed the broader market considerably over the past year. HD has gained 4% over this time frame, while the S&P 500 Index ($SPX) has rallied 15.1%. In 2024, shares of HD are down 1.2%, while the SPX is up 9% on a YTD basis.

Narrowing the focus, HD has outperformed the S&P 500 Cons Disc Sector SPDR (XLY). The exchange-traded fund has declined about 1.9% over the past year. Moreover, the ETF’s 4.9% losses on a YTD basis compare to the stock’s marginal loss over the same time frame.

HD’s overall performance can be attributed to a challenging economy in which higher interest rates have discouraged home sales and home improvements. High mortgage rates and higher home prices have dissuaded homebuyers. HD expects same-store sales for fiscal 2024 to dip 1% in fiscal 2024 as shoppers grapple with high inflation and refuse to spend on big-ticket items.

On May 14, HD shares fell nearly 1% after the company reported its Q1 results. Its comparable sales declined 2.8%, a bigger decline than the consensus estimate of 2.19%. The company’s revenue was $36.42 billion, lower than the analyst estimates of $36.65 billion. Its EPS stood at $3.63, compared to Street expectations of $3.59. The company has guided for 1% revenue and EPS growth for the full year.

For the current fiscal year, ending in Jan. 2025, analysts expect HD’s EPS to grow 1.1% to $15.27 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.

Among the 30 analysts covering HD stock, the consensus rating is a “Strong Buy.” That’s based on 22 “Strong Buy” ratings, one “Moderate Buy,” and seven “Holds.” 

This configuration is more bullish than three months ago, with 21 suggesting a “Strong Buy.” 

The mean price target of $387.07 represents a 13% premium to HD’s current price levels. The Street-high price target of $426 suggests an ambitious upside potential of 24.4%.

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