How Will Home Depot Balance Debt, Capex and Shareholder Payouts?

The Home Depot, Inc. HD faces an uphill task of balancing investments with shareholder returns and debt obligations. In the second quarter, the company invested nearly $915 million into the business while distributing about $2.3 billion in dividends. Capital spending for fiscal 2025 remains pegged at approximately 2.5% of total sales as Home Depot continues to expand its distribution network and digital capabilities while integrating SRS and preparing for the GMS acquisition.

During the first six months of fiscal 2025, Home Depot generated operating cash flow of about $8,968 million, covered $1,723 million in capital expenditures and $4,574 million in cash dividends. The remainder supported debt reduction of roughly $1,515 million.

An important part of this financial picture is the company’s debt management. At the end of the second quarter, Home Depot carried about $45,917 million in long-term debt (excluding current installments), lower than $51,869 million reported a year earlier, and about $2,804 million in cash and cash equivalents. Interest expenses came in at $575 million in the second quarter, with full-year net interest expenses expected to reach $2.2 billion. 

Share repurchase activity remains subdued for now. There were no buybacks in the first half, and management has no plans to resume share buybacks in fiscal 2025. As the integration of SRS continues and the pending GMS deal advances, Home Depot is signaling a steady path of disciplined capex, dependable dividends and selective debt reduction while leaving repurchases on hold.

Debt, Capex & Returns: A Look at Lowe’s and Floor & Decor

In the second quarter of fiscal 2025, Lowe's Companies, Inc. LOW spent about $495 million on capital expenditures and invested $1.3 billion to acquire Artisan Design Group while paying $645 million in dividends. Management emphasized that following its planned $8.8 billion acquisition of Foundation Building Materials, Lowe’s will pause share repurchases until it reduces leverage, while still targeting a 35% dividend payout. This underscores Lowe’s focus on protecting cash while funding growth.

Floor & Decor Holdings, Inc. FND approaches capital differently, leaning on a capital-light model while still expanding its store base. In the second quarter of 2025, Floor & Decor opened three new warehouse format stores, bringing the year-to-date total to seven, and reaffirmed plans for 20 openings this year. Floor & Decor ended the quarter with nearly $876.9 million in liquidity, including $176.9 million in cash, and maintained tight cost discipline.

What the Latest Metrics Say About Home Depot

Home Depot shares have risen 11.5% in the past year compared with the industry’s growth of 8%.
 

From a valuation standpoint, Home Depot trades at a forward price-to-earnings ratio of 25.70, higher than the industry’s 23.00. HD carries a Value Score of D.
 

The Zacks Consensus Estimate for Home Depot’s current financial-year sales implies year-over-year growth of 2.9%, while the same for earnings per share suggests a decline of 1.4%.
 

Home Depot currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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