Home Depot vs. Lowe's: Which is the Best Investment as Q2 Results Approach?

Core Viewpoint - Home Depot and Lowe's are set to report their Q2 earnings, with both companies showing positive stock momentum despite earlier tariff challenges. The upcoming earnings reports will be critical in assessing their recovery and future performance [1][11]. Group 1: Q2 Earnings Expectations - Home Depot's Q2 sales are projected to increase by 5% to $45.51 billion, up from $43.18 billion a year ago, with earnings expected to rise by approximately 1% to $4.71 per share from $4.67 [2]. - Lowe's Q2 sales are anticipated to grow nearly 2% to $23.99 billion compared to $23.59 billion in the prior period, with EPS expected to increase by 3% to $4.24 from $4.10 [3]. Group 2: Tariff Strategies - Lowe's has been more affected by tariff increases due to its reliance on imports from China, Canada, and Mexico. The CEO has emphasized competitive pricing and internal strategies to mitigate customer impact, including supply chain diversification and product redesign [4]. - Home Depot has a more diversified supply chain, sourcing over 50% of its products from U.S. suppliers, and has managed to shield customers from tariff impacts by avoiding aggressive price increases [5]. Group 3: Valuation Comparison - Lowe's stock is valued at 20.5X forward earnings, which is lower than Home Depot's 26.6X. Lowe's also trades below the industry average of 21X and the S&P 500's 24.7X [8]. - Home Depot's price-to-sales ratio stands at 2.4X, while Lowe's is below the optimal level of less than 2X [8]. Group 4: Dividend Comparison - Home Depot offers a 2.3% annual dividend yield, which is higher than Lowe's 1.9%. Both companies' dividends exceed the industry average of 1.06% and the S&P 500's average of 1.15% [10]. Group 5: Investment Outlook - The upcoming Q2 reports will be crucial for both companies to determine if they have moved past tariff challenges. Home Depot is viewed as a more favorable investment due to its diversified supply chain, while Lowe's may appeal to investors looking for a cheaper stock price [11].