Is Home Depot Still a Long-Term Winner Despite 2025 EPS Decline?

The Home Depot, Inc. HD faces a challenging fiscal 2025, as the company, on its last earnings call, guided a 5% decline in adjusted earnings per share from $15.24 in fiscal 2024. This downward revision from the previously projected 2% drop reflects ongoing housing market pressures, consumer uncertainty and a notable absence of storm activity that typically drives repair demand. Despite these headwinds and the anticipated earnings decline, third-quarter results indicate that the home improvement retailer is strengthening its position.

Management remains focused on strategic investments and market share gains. The company completed the acquisition of GMS to enhance its specialized Pro offerings, further solidifying its ecosystem for complex projects. While total sales growth for fiscal 2025 is expected to reach 3%, much of this increase is driven by the GMS integration rather than organic volume. For fiscal 2025, GMS is expected to contribute about $2 billion in incremental sales to Home Depot's top line.

Operationally, the company defended its third-quarter gross margin, which remained flat year over year at 33.4%. Despite consumer hesitation about large discretionary renovations, Home Depot saw growth in big-ticket transactions above $1,000. This ability to maintain pricing power and attract high-value transactions supports the view that the company is effectively gaining market share.

Digital platforms are becoming a key catalyst for Home Depot as it navigates a challenging retail environment. In the third quarter of fiscal 2025, online comparable sales rose approximately 11% year over year, following a 12% increase in the preceding quarter. This performance outpaced the company’s overall comparable sales growth of 0.2%.

Through its digital transformation, Home Depot is also targeting the high-value Pro segment. New offerings, such as a project planning tool and an artificial intelligence-driven blueprint takeoff application, are designed to convert complex manual processes into efficient digital workflows. Home Depot is clearly positioning itself to emerge stronger once the housing market stabilizes despite the earnings decline expected in fiscal 2025.

What the Latest Metrics Say About Home Depot

Home Depot, which competes with Floor & Decor Holdings, Inc. FND and Lowe's Companies, Inc. LOW, has seen its shares fall 7.7% in the past year compared with the industry’s decline of 13.8%. While shares of Floor & Decor Holdings have plunged 31.6%, Lowe’s has risen 5.1% in the said period.
 

From a valuation standpoint, Home Depot trades at a forward price-to-earnings ratio of 25.64, higher than the industry’s 23.13. HD carries a Value Score of D. Home Depot is trading at a discount to Floor & Decor Holdings (with a forward 12-month P/E ratio of 32.45) but at a premium to Lowe’s (21.39). 
 

The Zacks Consensus Estimate for Home Depot’s current financial-year sales implies year-over-year growth of 3.2%, while the same for earnings per share suggests a decline of 4.9%. For the next fiscal year, the consensus estimate indicates a 4.4% rise in sales and 4% growth in earnings.
 

Home Depot currently carries a Zacks Rank #4 (Sell).

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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