Home Depot Shows Signs of Turning the Corner. Is Now a Good Time to Buy the Stock?

Core Viewpoint - Home Depot is positioned for a potential rebound in the coming year despite facing operational challenges and declining same-store sales over the past quarters [1][2]. Sales Performance - Home Depot's same-store sales have declined for eight consecutive quarters, with a 1.3% drop in Q3 2024, which was better than the expected 3.3% decline [3][5]. - The U.S. same-store sales growth also reflected a similar trend, with a 3.5% decline in Q3 2023 [3]. Revenue and Earnings - The company's overall revenue increased by 6.6% to $40.2 billion, aided by the acquisition of SRS Distribution, while adjusted earnings per share (EPS) fell by 2% to $3.78, surpassing analysts' expectations [5]. - Management revised its full-year same-store sales guidance to a decline of 2.5%, an improvement from the previous forecast of a 3% to 4% decline [6]. Market Conditions - The home improvement sector has faced challenges due to the pandemic's impact on demand, inflation, and rising interest rates, which have slowed housing turnover to its lowest level in 30 years [8]. - The Federal Reserve's recent interest rate cuts and pent-up demand in home improvement are expected to benefit Home Depot in 2025 [9]. Future Outlook - Remodeling activity is projected to return to growth in the second half of 2025, with Home Depot likely to outperform this trend [10]. - The stock is currently trading at a price-to-earnings (P/E) ratio of approximately 27, indicating it is not undervalued, but potential operating leverage could lead to earnings growth as same-store sales improve [11].