Why Home Depot Is Suddenly Plunging

Core Insights - Home Depot reported disappointing Q3 results, with stock prices dropping as much as 5% in early trading [1] - Revenue increased by 2.8% year-over-year to $41.4 billion, but adjusted diluted earnings per share fell to $3.74, missing both the previous year's figure and Wall Street expectations [2] - The company has revised its full-year earnings guidance, now expecting a 5% decline in diluted earnings per share for 2025 compared to 2024, a downgrade from the previous forecast of a 2% decline [3] Financial Performance - Q3 revenue was $41.4 billion, reflecting a 2.8% increase from the previous year [2] - Adjusted diluted earnings per share were $3.74, which is $0.04 lower than the same period last year and $0.10 below analyst expectations [2] Market Conditions - The U.S. housing market remains stagnant, significantly impacting Home Depot's sales, particularly in storm recovery and repair items [3][4] - Elevated borrowing rates and a shortage of housing supply have contributed to a gridlock in the housing market, affecting both potential home buyers and current homeowners [6] Competitive Landscape - Competitor Lowe's has also experienced a decline in stock prices, down nearly 9% this year, reflecting the broader challenges in the home improvement sector [7] Future Outlook - The National Association of Realtors predicts a potential recovery in the housing market by 2026, contingent on job growth and lower mortgage rates [8] - Home Depot's inventory is significantly affected by tariffs, with nearly half sourced from outside the U.S., leading to modest price increases despite initial commitments to avoid raising prices [9] - The overall sentiment suggests that home improvement stocks may continue to face challenges until there is a clear recovery in the housing market [10]