Financial report outlook | Macro headwinds have not subsided. Can Home Depot, Inc. (HD.US) continue to maintain its performance stable?

Home Depot, Inc. (HD.US) will announce its fourth-quarter performance before the U.S. stock market opens on Tuesday. Analysts expect sales to rise, although same-store sales are expected to decline for the ninth consecutive quarter. Visible Alpha analysts are mostly positive about the stock of this home improvement giant, with 8 "buy" ratings, 3 "hold" ratings, and 1 "sell" rating. The average target price for this retailer is around $433. It is expected that Home Depot, Inc. will report an adjusted earnings per share (EPS) of $3.02 for the final quarter of 2024, with sales increasing by 11% year-over-year to around $39 billion, higher than the $34.79 billion from the same period last year. While Home Depot, Inc. exceeded expectations in the last quarter, CEO Ted Decker mentioned that "economic uncertainties still exist." However, analysts also predict that same-store sales for Home Depot, Inc. are expected to decline once again, with a expected 1.66% year-over-year decrease. Competitors Walmart Inc. (WMT.US) and Lowe's Companies, Inc. (LOW.US) have indicated that sales of "big-ticket" items like appliances are being impacted by inflation. In a recent report, analysts at J.P. Morgan stated that they expect Home Depot, Inc.'s same-store sales growth for the fourth quarter to surpass expectations at 0.8%. They believe that Home Depot, Inc.'s forecasts for 2025 will be conservative given the "long three years" since the company last achieved positive comparable sales in the third quarter of 2022. J.P. Morgan analysts have raised the target price for Home Depot, Inc. stock from $450 to $475, and have included it in their "analyst focus growth investment list" based on its valuation relative to retail peers. By 2025, mortgage rates higher than the optimal level are expected to dampen housing transaction volumes. At Lowe's Companies, Inc.'s investor day in December, the sentiment of stagnant demand was echoed, with the company indicating that industry sales will remain flat in 2025. Signs of stable demand sentiment can still be seen as furniture and home sales averaged a 1% growth while sales at building, garden, and equipment dealers declined by an average of 1% over the past three months. This indicates that even though large projects are not a priority, customers are still engaging. It is worth noting that tariffs remain an uncertain factor, with concerns surrounding categories such as raw materials and finished goods. For example, appliances from Asia could be a target, accounting for 9.1% of sales in 2023. Fortunately, due to its size, Home Depot, Inc. should be able to absorb increased tariff costs without significantly impacting its profitability. American DIY consumers continue to feel pressure from high interest rates and macroeconomic uncertainties, leading to a 6.8% decline in sales of big-ticket items and another decline in small-item sales. Low housing transaction volumes have also weighed on DIY performance as potential buyers wait for mortgage rates to drop. However, we expect the real estate market to improve in the second half of 2025, leading to a normalization of DIY spending. Nonetheless, Home Depot, Inc. boasts a wide economic moat. As the world's largest home improvement retailer, Home Depot, Inc. has a competitive advantage due to its brand intangible assets and cost advantages. Over the past 10 years, Home Depot, Inc. has exceeded the average annual growth rate of the building materials and garden equipment industry by 5.3%, according to data from the U.S. Census Bureau, indicating the brand's continued relevance. Analysts speculate that Home Depot, Inc.'s strong brand assets and extensive scale should continue to increase its market share in the highly fragmented $1 trillion North American home improvement market, where it has already accumulated over 15% market share (considering sales of approximately $153 billion in 2023).