Oppenheimer's Brian Nagel: Home Depot sales will reaccelerate as rates move lower

Market Overview & Trends - Home Depot's sales momentum is lacking due to less accommodative interest rates, impacting the home improvement channel [2][3] - Summer-like weather helped Home Depot's sales growth slightly during the fiscal quarter [4] - Delays in large renovations are observed, with expectations of lower rates as a trigger for project commencement [9] - A 5% handle on the 30-year fixed mortgage rate could unlock significant remodeling demand [11] Company Performance & Strategy - Home Depot is managing wealth and is a well-run company in a solid sector, but lacks sales momentum [2] - Home Depot benefits from pent-up demand in the US housing market, which is expected to resurge as rates move lower [7] - Home Depot is making better and bigger moves in the complex pro business [15] Investment Recommendation & Valuation - Oppenheimer views Lowe's as a better investment play due to more operational slack and a wider valuation gap compared to Home Depot [13][15] - Lowe's operations are now very close to Home Depot's, but there's still a little more slack there [14] - Despite improvements at Lowe's, the valuation gap between Lowe's and Home Depot has remained very wide, making Lowe's cheap [15] Interest Rate Impact - Lower mortgage rates are expected to re-accelerate sales at Home Depot [7] - A move towards a 5% handle on the 30-year fixed mortgage rate is anticipated to unlock remodeling demand [11] - Lower HELOC (Home Equity Line of Credit) rates, influenced by Fed moves, could fuel remodeling demand by allowing homeowners to tap into historic equity [12]