Home Depot on Tuesday reported mixed quarterly results, but checked a number of other crucial boxes for investors â and that was enough for shares to buck the broader market decline in the session. Revenue in the company’s fiscal 2025 first quarter rose 9.4% year over year to $39.86 billion, beating expectations of $39.31 billion, according to estimates compiled by LSEG. Adjusted earnings per share (EPS) in the three months ended in April totaled $3.56, missing the consensus of $3.60, LSEG data showed. Comparable store sales dropped 0.3%, compared with expectations for a 0.1% decline, according to FactSet. Shares of Home Depot, like the broader market, have rebounded from their tariff-driven lows of the year on April 8. The stock ended Monday’s session up around 13% since then, though that trails the S & P 500 , which has soared almost 20% in the same stretch. President Donald Trump paused most of his “reciprocal tariffs” during the April 9 session, causing a historic single-day rally on Wall Street that has had legs in the weeks that followed. A rise in interest rates â and by extension mortgage rates â during this same period could help explain why Home Depot shares have underperformed. HD YTD mountain Home Depot’s year-to-date stock performance. Bottom line Investors weren’t expecting much from Home Depot’s headline first-quarter numbers, given unforgiving weather in February and the dark cloud of tariff uncertainty raining on March and April. Instead, the market wanted to see Home Depot reiterate its full-year guidance despite those obstacles and indicate that sales were trending upward, setting up a better second half of the year. Check and check. “From the macro, the worst concerns, I think, have passed,” CEO Ted Decker said on Tuesday’s conference call. The company said it is still expecting total sales growth of roughly 2.8% this fiscal year; comparable sales growth of 1%; adjusted operating margin of 13.4%; and adjusted EPS to decline 2% on an annual basis. And within the quarter, comparable store sales, or comps â which strip out the impact of store openings and calendar differences â went from down 3.3% annually in February to up 1.3% in March and up 1.8% in April. Plus, executives on the call said sales in the first two weeks of the second quarter in May looked good, which at this point is much more important than what happened in February. That’s especially true because the spring time is Home Depot’s Christmas, as Jim Cramer put it last week , or its Super Bowl, as one executive said on Tuesday’s call. Whatever analogy one prefers, the point is investors should be pleased with where the business is tracking during its crucial season as people plant gardens and fix up the yard. Home Depot Why we own it: We added Home Depot to the portfolio ahead of the Federal Reserve’s first interest rate cut in September, betting that lowering borrowing costs will be on the horizon and spark a recovery in activity in the housing market. While mortgage rates have remained stubbornly high and tariffs add to economic uncertainty, the company Competitors : Lowe’s Portfolio weighting: 3.92% Most recent buy: March 28, 2025 Initiated : Sept. 9, 2024 A few more things to like from the report: U.S. comps actually topped expectations, rising 0.2% in the quarter versus the FactSet consensus of flat. That certainly outshines the companywide drop of 0.3%, which was a bit worse than expectations of minus 0.1%. And secondly, Home Depot CFO Richard McPhail told CNBC the retailer expects to “generally maintain” its current prices in the face of higher tariffs â a positive disclosure for a few reasons. It is good for winning customers at a time when housing market activity, a key driver of its business, and larger remodeling projects remain subdued due to elevated interest rates. It makes the company’s reiteration of its margin and earnings outlook even more impressive. And finally, it hopefully should help the company avoid the ire of Trump, who has attacked Walmart for its planned tariff-related price hikes. We’re reiterating our buy-equivalent 1 rating and price target of $440 a share on Home Depot’s stock. Commentary Unsurprisingly, Home Depot’s supply chain and tariff strategies were big themes on Tuesday morning’s conference call. On multiple occasions, executives said that a year from now, no single country outside of the U.S. will represent more than 10% of its merchandise purchases â and that is made possible by an effort to diversify its supply chain well before Trump’s latest round of tariffs. Already, more than 50% of Home Depot’s purchases are sourced in the U.S., executives said. This helps explain why the company is not planning to usher in “broad-based price increases for our customers at all going forward,” as Billy Bastek, executive vice president of merchandising, said on the call. There’s also a strategic element that advances Home Depot’s long-standing growth plan. “It’s a great opportunity for us to take share and it’s a great opportunity for our suppliers to take share, as well,” Bastek said. Decker, the CEO, also added on the call: “We will continue investing in our business to ensure we are best-positioned to gain market share, particularly in periods of disruption.” To be sure, analysts asked executives whether its decision to maintain prices despite tariffs would limit some of the gross margin expansion investors were otherwise expecting Home Depot to accomplish through productivity enhancements and reduced “shrink,” an industry term for merchandise lost to damage and theft. We didn’t really get a clear answer here, but Bastek stressed that Home Depot has “a number of different levers” it can pull, including productivity, to manage through the situation. As the threat of steeper tariffs intensified in recent months, some consumers went out and purchased things they feared would soon go up in price, such as iPhones and cars. Asked whether Home Depot saw similar behavior in the quarter, executives said they did not believe those dynamics were material. If there was any category that did see some pull forward of demand, it might’ve been in appliances, they said. Across the broader business, executives downplayed any concerns. The housing market and larger home-improvement projects were additional topics of extended conversation, as expected. Decker acknowledged that mortgage rates haven’t cooperated. However, the CEO expressed a belief that, eventually, housing turnover will budge off its multidecade lows , which would stimulate demand for Home Depot. Decker also reiterated his expectation that the amount of expensive kitchen and bath remodelings will pick up. He said the company believes there’s about $50 billion cumulative shortfall in spending on home improvement. “The large project generally requires some sort of financing, and while there are literally trillions of dollars of equity available to be tapped in the homes, I think there’s still enough macro uncertainty â and again those stubbornly high interest rates â that people are painting again and working in their yards and doing smaller projects, but just have not engaged in the larger projects,” Decker said. “Obviously, we think that will increase.” One more thing: Decker & Co. offered positive commentary on its progress with the $18 billion acquisition of SRS Distribution, which closed last year and bolstered Home Depot’s ability to serve the lucrative professional contractor market in the areas of roofing, landscaping and pools. “We’re super pleased with SRS’s performance. If you just look at their growth by the three verticals they operate in, we exceeded our expectation. We believe they’re taking share in each of those three verticals,” Decker said. (Jim Cramer’s Charitable Trust is long HD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
An aerial view of a sign in front of a Home Depot store on Feb. 25, 2025 in El Cerrito, California.
Justin Sullivan | Getty Images
Home Depot on Tuesday reported mixed quarterly results, but checked a number of other crucial boxes for investors â and that was enough for shares to buck the broader market decline in the session.
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