Why Home Depot Is Suddenly Plunging

"You can do it. We can help." So goes the advertising slogan of Home Depot (NYSE: HD).

Yet the sales, earnings, and share price of the home improvement retailer all need a lot of help right now. The stock was down as much as 5% in early trading on Tuesday.

What's happening?

Image source: Getty Images.

An anemic Q3 and revised outlook

The company announced third-quarter financial results on Tuesday morning, and they were somewhat dire.

Revenue rose slightly, up 2.8% from a year earlier to $41.4 billion, in line with expectations. But adjusted diluted earnings were $3.74 per share -- $0.04 below the same period a year ago, and $0.10 below what Wall Street was looking for.

Management blamed a lack of storms in the quarter. Sales of storm recovery and repair items like generators and roofing are a big revenue category for the retailer. It also pointed to ongoing uncertainty and pressure in the U.S. housing market that is affecting home improvement demand.

Perhaps more ominously, the company cut its full-year earnings guidance. It now expects diluted earnings per share to decline 5% in 2025 compared to 2024. That's lower than its previous forecast of a 2% decline.

A stagnant market for housing

The sluggish U.S. housing market continues to be a major drag on the financial results of Home Depot and other home improvement retailers. They're highly dependent on sales to homeowners who are selling homes, as well as those who just purchased one.

Yet the housing market has been stagnant in 2025 due to elevated borrowing rates and a shortage of supply. Plus, many potential home buyers remain on the sidelines as they wait for mortgage rates to drift lower, and current homeowners are reluctant to move and give up their historically low mortgage rates. The result is a state of gridlock.

The financial results and share price of competitor Lowe's have also suffered from the poor housing market. That company's stock is down almost 9% this year.

A housing comeback?

The National Association of Realtors is now predicting a comeback for the housing market in 2026, due to steady job growth and lower mortgage rates. But such a scenario is dependent on many other factors and far from a sure thing.

Home Depot has also felt the effect of Trump administration tariffs. Almost half of the company's inventory comes from suppliers outside the U.S. The company originally said it would not raise its prices due to higher tariff-related costs, but then walked that back and predicted modest price increases.

Home Depot shares are down about 8% so far this year, and 12.3% over the past 52 weeks.

Until there is light at the end of the dark housing market tunnel, home improvement stocks look like they will continue to drift sideways, or even lower.

Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends Lowe's Companies. The Motley Fool has a disclosure policy.