The Home Depot, Inc. HD is set to report first-quarter fiscal 2025 results on May 20, before market open. The company’s top line is expected to have increased year over year in the to-be-reported quarter. The Zacks Consensus Estimate for fiscal first-quarter revenues is pegged at $39.3 billion, indicating growth of 8% from that reported in the year-ago quarter.

The Zacks Consensus Estimate for quarterly earnings per share (EPS) of $3.59 indicates a decline of 1.1% from the year-ago period’s reported figure. The consensus estimate for EPS has been unchanged in the past 30 days. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

The Atlanta, GA-based company has been reporting steady earnings despite the softened demand environment. The company has delivered a positive bottom-line surprise trend in the trailing four quarters. The leading home improvement retailer delivered a trailing four-quarter average earnings surprise of 2.6%. In the last reported quarter, the company delivered an earnings surprise of 3%. Given its positive record, the question is, can HD maintain the momentum?

HD’s Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Home Depot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Home Depot has an Earnings ESP of -0.32% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Trends to Monitor Before HD’s Q1 Earnings

Home Depot’s first-quarter fiscal 2025 results are expected to reflect continued top-line recovery, supported by SRS contributions, broad-based category growth and positive Pro sales.

The company is advancing its "One Home Depot" plan, focusing on supply-chain expansion, technology investments and digital enhancements. The interconnected retail strategy remains a key growth driver, ensuring a seamless shopping experience. HD expects the business momentum from late 2024 to carry into 2025.

On the last reported quarter’s earnings call, Home Depot predicted a resilient customer base, strong market position and ongoing investments to enable market share growth and sustain profitability.

With a vast store network, a comprehensive product offering and a growing online presence, HD is well-positioned to meet evolving consumer demands. Its interconnected retail model and strong tech infrastructure have driven web traffic and supported the buildout of a scalable Pro ecosystem, solidifying its competitive advantage. Our model predicts comparable store sales to increase by 3.8% in the first quarter of 2025, with a 2.1% increase in customer transactions and a 1.4% rise in average ticket.

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The Home Depot, Inc. Price and EPS SurpriseThe Home Depot, Inc. Price and EPS Surprise

The Home Depot, Inc. price-eps-surprise | The Home Depot, Inc. Quote

However, the company continues to grapple with ongoing challenges, including softened demand and pressure in high-ticket discretionary categories, factors that have impacted both total and comparable sales. Macroeconomic pressures are also weighing on profitability. Elevated interest rates, which surged in early 2024, continue to influence consumer behavior and financing expenses. The company expects net interest expenses to increase year over year in the near term.

Home Depot has been seeing soft engagement for big-ticket discretionary categories, such as kitchen and bath remodels, as higher interest rates discouraged financing-dependent projects. With no major improvement expected in interest rates or housing turnover in 2025, the company anticipates continued pressure on big-ticket renovations, such as kitchen and bath remodels.

While Pro sales have been strong, the shift in consumer spending toward smaller-scale repairs and maintenance projects suggests that larger project demand may not rebound meaningfully in the near term, limiting growth potential in high-margin categories.

We expect operating income to increase 0.7% in the fiscal first quarter, with a 90 basis points decline in operating margin.

HD’s Price Performance & Valuation

Home Depot’s shares have gained 8.8% in the past year, comparing unfavorably with the S&P 500 and the Retail-Wholesale sector’s growth of 17.6% and 10.9%, respectively. The HD stock has also lagged the industry’s 2.9% rise in the same period.

However, the Home Depot stock has outpaced its arch-rival Lowe’s Companies Inc.’s LOW decline of 1.6% in the past year. Shares of competitors FGI Industries FGI and Floor & Decor FND recorded declines of 46.7% and 32.8%, respectively, in the same period.

At the current price of $372.81, HD trades at a 15.1% discount from its 52-week high mark of $439.37, reflecting an upside potential.

HD’s One-Year Stock PerformanceZacks Investment Research

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Home Depot’s current valuation appears quite pricey. The company trades at a forward 12-month P/E multiple of 24.15X, exceeding the industry average of 21.42X and the S&P 500’s average of 21.59X.

Given the premium valuation, investors could face significant risks if the company's future performance does not meet expectations. The retail market is becoming increasingly competitive and Home Depot’s initiatives may not suffice to drive significant growth. Macroeconomic challenges and heightened competition can impede the company's ability to sustain its current growth trajectory.Zacks Investment Research

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Investment Thesis

Home Depot has consistently delivered strong revenue growth and profitability, anchored by its leadership in the home improvement sector and execution of its “One Home Depot” strategy. Investments in digital capabilities, supply-chain efficiency and store technology have positioned the company to effectively serve both DIY customers and professional contractors.

The retailer’s interconnected model, blending physical stores with a robust online presence, continues to enhance customer experience and drive web traffic. Home Depot is also expanding its Pro ecosystem and recently acquired SRS Distribution, strengthening its reach in building materials and improving service for trade professionals.

While the long-term outlook remains solid, near-term headwinds such as softer demand for big-ticket items and broader economic pressures may limit upside. Investors may wish to remain cautious in the short term while recognizing Home Depot’s strong positioning for long-term growth.

Conclusion

As HD approaches its first-quarter fiscal 2025 earnings release, investors are watching closely to see whether the company can meet expectations. While its strong market position, strategic initiatives such as the “One Home Depot” plan and steady growth in Pro customers are encouraging, it is equally important to consider potential risks. Evaluating both strengths and uncertainties ahead of earnings can help investors make a more informed decision.

Despite Home Depot’s solid long-term outlook, a patient approach may be warranted. Waiting for greater clarity post-earnings could present a more attractive entry point. For those already holding the stock in their portfolios, staying invested appears sensible, especially as the upcoming results are likely to reaffirm the company’s operational resilience and strategic direction.

In a retail landscape shaped by shifting consumer trends and macroeconomic pressure, Home Depot’s consistent execution, digital transformation and Pro segment expansion remain key pillars supporting its investment case, making it a stock worth watching closely.

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This article originally published on Zacks Investment Research (zacks.com).

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