Lowe's shares may be a better pick than Home Depot's right now, Oppenheimer says. Justin Sullivan / Getty Images Close Key Takeaways The market may be expecting too much from both Home Depot and Lowe's, according to Oppenheimer analysts, but one of the home improvement retailer's shares look a little less lofty. Shares of both companies are trading at relatively high prices, given that their sales will likely remain soft for some time, Oppenheimer analysts said Thursday. A rebound in the stagnant housing ma ...

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Core Insights - The potential for lower interest rates is expected to be gradual and may not provide the necessary momentum to revitalize the housing market [1] Group 1 - Analysts from Oppenheimer suggest that the impact of lower interest rates on the housing market will be limited and slow [1]

This story was originally published on CFO Dive. To receive daily news and insights, subscribe to our free daily CFO Dive newsletter. Dive Brief: CFOs expect tariffs to have a major impact on price growth at their organizations this year as well as in 2026, according to a quarterly survey of finance chiefs by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. On average, price growth would be about 30% lower in 2025 and roughly 25% lower in 2026 without the ...

Core Insights - Home Depot and Floor & Decor are significant players in the Retail - Home Furnishings industry, with Home Depot being the largest home improvement retailer globally, while Floor & Decor specializes in hard-surface flooring [1][2]. Home Depot Overview - Home Depot has a market capitalization of approximately $409 billion and operates over 2,300 stores, offering a wide range of building materials, tools, appliances, and décor products [1]. - For fiscal 2025, Home Depot anticipates total sales growth of about 2.8%, comparable sales growth of roughly 1%, and an adjusted operating margin of 13.4% [3]. - In Q2, Home Depot's sales increased by 4.9% year-over-year to $45.3 billion, with 1% growth in overall comparable sales [4]. - The company is focusing on digital transformation, with online comparable sales rising about 12% in the quarter, enhancing customer satisfaction and engagement [5]. - The professional customer segment is a major growth driver, with significant spending increases observed among Pro customers utilizing trade credit facilities [6]. Floor & Decor Overview - Floor & Decor has a market capitalization of around $8.8 billion and operates over 250 warehouse-format stores, focusing on the hard-surface flooring market [2]. - In Q2, Floor & Decor reported a 7.1% year-over-year increase in net sales and an 11.5% rise in earnings per share, aided by margin expansion [9]. - The company plans to open 20 new warehouse stores in fiscal 2025 and at least another 20 in 2026, contributing to revenue and market share growth [10]. - Floor & Decor is benefiting from high-margin verticals, particularly design services and commercial projects, with design-driven sales growing rapidly [11]. - Management forecasts fiscal 2025 revenues between $4.66 billion and $4.75 billion, reflecting 5-7% year-over-year growth [12]. Comparative Performance - Over the past six months, Home Depot shares have increased by 13.9%, while Floor & Decor shares have decreased by 1.2%, contrasting with the overall industry growth of 12.5% [20]. - Home Depot's forward P/E ratio is 25.86, while Floor & Decor's is 39.17, indicating differing valuations [21]. - Home Depot's scale, diversified offerings, and digital capabilities provide resilience against economic fluctuations, while Floor & Decor faces challenges from a weak housing market and discretionary spending pressures [22].

Core Insights - The Home Depot has launched a digital platform aimed at assisting professional renovators, remodelers, and specialty tradespeople in managing complex projects [1][2] - The Project Planning tool allows users to create materials lists, track orders and deliveries, and set delivery preferences, enhancing project management efficiency [2][3] - The platform provides early pricing and inventory visibility, enabling professionals to give accurate estimates to clients and facilitating multiuser collaboration [3] Company Strategy - Home Depot's Project Planning tool is designed to streamline the planning, purchasing, and monitoring of complex projects, leveraging the company's extensive product assortment and expertise [4] - The company recognizes that contractors and remodelers are crucial to its market positioning over the next decade, as these professional customers spend more per project and require greater supply reliability [4][5] - Technology plays a vital role in Home Depot's B2B expansion, with initiatives including pro-specific digital platforms, AI-powered delivery scheduling, and dynamic inventory forecasting [6] Market Positioning - In March 2024, Home Depot announced the acquisition of SRS, a distribution company for contractors, to accelerate growth within its professional customer base and expand its total addressable market [7] - The company views the professional segment as a more reliable growth driver compared to the do-it-yourself market, which is evenly split in terms of business [7]

Core Viewpoint - Home Depot's multiyear downturn may be nearing an end, with potential for recovery driven by lower interest rates and increased consumer spending [1][3][5] Group 1: Economic Environment - The Federal Reserve is cutting interest rates by 0.25% to stimulate consumer spending and address a weak labor market, with further cuts possible [2] - Lower interest rates can lead to increased consumer borrowing for home improvement projects, benefiting Home Depot [5][6] - Economic uncertainty is the primary reason customers are deferring large home improvement projects, according to Home Depot's CEO [6] Group 2: Company Performance and Strategy - Home Depot's earnings have been declining, with fiscal 2025 same-store sales expected to grow by only 1% [1][12] - The company has invested heavily in its professional and commercial contractor business, including the $18.25 billion acquisition of SRS Distribution [7][8] - The SRS acquisition positions Home Depot for future growth, potentially amplifying benefits from lower interest rates [8] Group 3: Market Valuation - Home Depot's stock is currently priced as if interest rates will continue to fall, despite its recent struggles [9][12] - The stock has a price-to-earnings ratio of 28.2, which is above its 10-year median P/E of 23, indicating that earnings would need to grow significantly for valuation to align with historical averages [13][14] - While Home Depot is a quality company, it is not considered a strong buy at current valuations, although it may be a good long-term investment [15][16][17]

Group 1 - The Home Depot, Inc. has completed the acquisition of GMS Inc. for $5.5 billion, enhancing its position in the building materials distribution sector [2][3] - The acquisition allows The Home Depot to better serve professional contractors and unlock cross-selling opportunities [3] - Nearly 80% of GMS shares were tendered, facilitating its integration as a wholly owned subsidiary of The Home Depot [3] Group 2 - The Home Depot is recognized as one of the best stocks for financial stability and investment [1][4] - The company operates as the world's largest home improvement retailer, providing a wide range of building materials and professional solutions [4]

Core Insights - Home Depot, Inc. reported a 4.9% increase in sales for Q2 fiscal 2025, reaching $45,277 million, with comparable sales rising by 1% [1][8] - The Federal Reserve's recent interest rate cut may provide relief for customers seeking financing for home renovations, potentially impacting future sales positively [3][4] Group 1: Financial Performance - Home Depot's Q2 sales increased to $45.3 billion, with comparable sales up 1% [8] - Big-ticket transactions over $1,000 rose by 2.6%, driven by building materials, lumber, and hardware [2] - The Zacks Consensus Estimate for current financial-year sales suggests a year-over-year growth of 2.9%, while earnings per share are expected to decline by 1.4% [10] Group 2: Market Dynamics - The housing market is described as "frozen," with turnover at multi-decade lows, primarily due to economic uncertainty [2] - Homeowners are deferring projects rather than canceling them, with record levels of tappable equity available [4] - Lower borrowing costs from the Fed's rate cut could encourage homeowners to proceed with larger remodeling projects [3][4] Group 3: Competitive Landscape - Lowe's and Floor & Decor are also positioned to benefit from the Fed's shift towards easier monetary policy, as lower rates may renew demand for big-ticket remodeling projects [5][6] - Home Depot's shares have increased by 7.9% over the past year, outperforming the industry growth of 2.6% [7] Group 4: Valuation Metrics - Home Depot trades at a forward price-to-sales ratio of 2.49, which is higher than the industry's 1.74 [9] - The company carries a Value Score of D, indicating potential concerns regarding its valuation relative to peers [9]

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Home Depot (HD), and suggests that while the average brokerage recommendation (ABR) indicates a positive outlook, it may not be a reliable basis for investment decisions due to potential biases from brokerage firms [1][2][7]. Group 1: Brokerage Recommendations - Home Depot has an average brokerage recommendation (ABR) of 1.66, indicating a consensus between Strong Buy and Buy, with 67.6% of recommendations being Strong Buy and 2.7% being Buy [2]. - The ABR is based on recommendations from 37 brokerage firms, but studies show limited success in using these recommendations to identify stocks with the best price increase potential [2][3]. - Brokerage analysts tend to exhibit a strong positive bias in their ratings, with five "Strong Buy" recommendations for every "Strong Sell" [3][7]. Group 2: Zacks Rank Comparison - Zacks Rank is a proprietary stock rating tool that categorizes stocks from Zacks Rank 1 (Strong Buy) to Zacks Rank 5 (Strong Sell) and is based on earnings estimate revisions, which are correlated with near-term stock price movements [5][8]. - The Zacks Rank is more timely and reflects the latest earnings estimates, while the ABR may not be up-to-date [9]. - Home Depot currently holds a Zacks Rank 3 (Hold), indicating a cautious outlook despite the positive ABR [10][11]. Group 3: Investment Implications - The unchanged Zacks Consensus Estimate for Home Depot at $15.03 suggests that analysts have steady views on the company's earnings prospects, which may lead to performance in line with the broader market [10]. - Given the Zacks Rank and the cautious outlook, it may be prudent to be cautious with the Buy-equivalent ABR for Home Depot [11].