Lowe's vs. Home Depot: Which Benefits More From Lower Rates?

Core Viewpoint - The home improvement sector, particularly companies like Home Depot and Lowe's, has underperformed in 2025 due to high interest rates and a slowdown in home sales, but may benefit from potential interest rate cuts by the Federal Reserve. Group 1: Market Performance - Home Depot and Lowe's have significantly lagged behind the S&P 500, which has returned over 13% year-to-date, while both stocks have traded negatively for most of 2025 [2] - Home Depot's stock price forecast is $436.40, indicating a 13.69% upside based on 27 analyst ratings, while Lowe's forecast is $283.83 with a 19.45% upside [5][10] Group 2: Company Performance - Both companies reported solid earnings and comparable sales growth in Q2, but missed expectations due to soft demand for big-ticket projects [6] - Home Depot's revenue is nearly double that of Lowe's, generating just under $160 billion compared to Lowe's $83 billion [8] Group 3: Market Sensitivity - Home Depot's Pro segment, which accounts for over 50% of its revenue, provides some protection against interest rate sensitivity, while Lowe's is more vulnerable due to its focus on the DIY market, which derives approximately 70% of its revenue from discretionary spending [7][10] - The high-interest-rate environment has stymied home sales and renovations, leading to a frozen housing market [4] Group 4: Future Outlook - If interest rates decline rapidly, Lowe's could see elevated sales growth due to the unlocking of 'trapped' equity, while Home Depot's sales growth is more stable [13] - Both stocks face challenges in 2025, but a potential 50-basis-point rate cut could provide a minor rally [14]