Home Depot's fiscal second-quarter revenue and earnings beat Wall Street estimates, with same-store sales accelerating each month of the quarter despite a housing market squeezed by high borrowing costs. CNBC's Investing Club raised its price target on the stock to $370 and upgraded it to a buy-equivalent rating.
Home Depot's revenue rose 5.7% year over year to $47.86 billion in the quarter ended August 2, topping the $47.27 billion analysts polled by LSEG had expected. Earnings per share climbed 5.1% to $4.92, ahead of the $4.73 LSEG estimate. Shares rose modestly Tuesday even as the broader market fell.
Comparable sales build through the quarter
Company-wide same-store sales increased 1.7%, nearly double the 0.9% FactSet estimate and almost triple the first quarter's 0.6% pace. The gain came from a 2.8% rise in average ticket size, which more than offset a 1% decline in customer transactions. Growth also built as the quarter progressed: overall comps rose 1.2% in May, 1.5% in June, and 2.3% in July, while big-ticket transactions over $1,000 climbed 2.4%. Thirteen of the company's 16 merchandising departments posted positive comps, and digital sales grew 11% year over year, the fifth straight quarter of double-digit online growth.
Housing headwinds persist
CFO Richard McPhail described the backdrop as "frozen housing conditions" on the earnings call, and the company's fate remains tied to mortgage and home-equity borrowing costs that move with Treasury yields. A recent surge in 30-year Treasury yields to their highest levels in nearly two decades will likely cap near-term upside, but the stock has already gained more than 17% since its 52-week low of $289 on May 19. Home Depot also recovered about $685 million in tariff refunds, more than 90% of what it had filed for, which reduced cost of goods sold and added 85 basis points to the quarter's gross margin.
Guidance held steady
Management reaffirmed its 2026 outlook, calling for sales growth of 2.5% to 4.5% and adjusted earnings-per-share growth of flat to 4%, with same-store sales seen ranging from flat to up 2%. CEO Ted Decker remains on medical leave, with McPhail saying he expects Decker back in a few months while McPhail and U.S. stores chief Ann-Marie Campbell oversee daily operations.
Trading around a price-to-earnings multiple toward the low end of its three-year range and carrying a dividend yield near 2.75%, the stock's next catalyst hinges on whether Treasury yields ease enough to revive housing activity.
Source: CNBC
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