Lowe's shares may be a better pick than Home Depot's right now, Oppenheimer says. Justin Sullivan / Getty Images Close Key Takeaways The market may be expecting too much from both Home Depot and Lowe's, according to Oppenheimer analysts, but one of the home improvement retailer's shares look a little less lofty. Shares of both companies are trading at relatively high prices, given that their sales will likely remain soft for some time, Oppenheimer analysts said Thursday. A rebound in the stagnant housing ma ...

Core Thesis - LoanDepot, Inc. is positioned for potential recovery and profitability despite current challenges, driven by its tech-enabled mortgage platform and diversified revenue streams [1][5]. Company Overview - LoanDepot is a tech-enabled retail mortgage originator and loan servicer, focusing on direct-to-consumer lending and complementary revenue streams such as title, insurance, real estate referrals, and HELOCs [2]. - The company surpassed $4 billion in revenue by 2020 and employed over 12,000 people during the low-rate housing boom [2]. Current Challenges - Elevated interest rates have frozen the housing market, resulting in prolonged losses and a declining stock price [3]. - In response, LoanDepot has implemented cost reductions, headcount rationalization, and is expanding its Mello platform under the "Vision 2025" initiative [3]. Operational Improvements - Recent operational improvements indicate a move toward profitability, with net losses narrowing in Q1 and Q2 2025 compared to prior quarters [4]. - LoanDepot's business model differs from capital-intensive iBuyers, leveraging mortgage origination and servicing capabilities that are less sensitive to housing price fluctuations [4]. Key Catalysts - Potential easing of interest rates and further integration of AI and automation through the Mello platform are expected to streamline loan processing [4]. - The "North Star" initiative focuses on customer engagement and retention, with a 70% recapture rate, the highest in the industry [4]. Financial Position - LoanDepot has substantial liquidity with over $400 million in cash and $1.2 billion in available credit, minimizing dilution risk [5]. - The company is viewed as having a compelling risk-reward opportunity, especially with the housing market poised for recovery [5]. Comparative Analysis - LoanDepot's diversified revenue streams and AI-driven efficiencies are emphasized as key advantages, similar to the bullish perspective on Rocket Companies, Inc. [6].

Core Insights - The U.S. housing market is experiencing a balance between affordability challenges and pent-up demand, with optimism emerging due to easing mortgage rates and potential Federal Reserve rate cuts [1][8] Builder Sentiment - Builder confidence in newly built single-family homes remained at 32 in September, unchanged from August, with future sales expectations rising to 45, the highest since March [2][8] - 39% of builders reported price reductions in September, the highest since the post-COVID period began, with an average reduction of 5% [3][8] Economic Factors - Inflation remains a concern, with the consumer price index rising 2.9% year-over-year in August, indicating ongoing price pressures [4] - The labor market showed weakness, adding only 22,000 jobs in August, with the unemployment rate increasing to 4.3% [5] - Mortgage rates have decreased to 6.35%, the lowest since mid-October 2024, potentially reopening opportunities for sidelined buyers [6][8] Industry Performance - The Zacks Building Products – Home Builders industry gained 29.5% over the past three months, outperforming the broader Zacks Construction sector and the S&P 500, both of which increased by 12.1% [10] - D.R. Horton (DHI) has seen a 41.6% increase in stock price over the past three months, with an upward revision of fiscal 2025 earnings estimates [14] - Toll Brothers (TOL) gained 34% in the same period, benefiting from potential confidence revival among high-income households [15] - Home Depot (HD), Lowe's (LOW), and Masco (MAS) have also posted significant gains, with respective increases of 21.4%, 28.3%, and 20.4% [16][17]

Core Insights - The interest rate on the most popular U.S. home loan has dropped significantly, with a 15 basis point decrease to 6.49%, the lowest since last October, driven by a weak employment report and expectations of a Federal Reserve rate cut [1][2] Group 1: Mortgage Rates and Applications - The 30-year fixed-rate mortgage rate has decreased by 60 basis points since mid-January, leading to increased application volumes for both home purchases and refinancing [2] - The Mortgage Bankers Association's weekly applications index rose by 9.2% to 297.7, the highest level in over three years, with refinancing applications increasing by 12.2% [3] - Refinancing applications accounted for nearly half of all applications last week, while the index for property purchase loans rose by 6.6%, reaching its highest in about two months [3] Group 2: Housing Market Conditions - The housing market has been experiencing a slump due to high borrowing costs, elevated property prices, and limited supply, but recent data indicates potential recovery [4] - The supply of existing homes for sale is gradually increasing, annual price increases are leveling off, and interest rates may ease further as the Federal Reserve appears ready to cut rates [4] Group 3: Economic Context - The Federal Reserve has maintained its benchmark rate at 4.25%-to-4.50% since last December, primarily due to concerns over inflation driven by tariffs [5] - Recent job reports have underperformed expectations, with significant downward revisions to prior job growth estimates, contributing to the decline in Treasury yields and subsequently mortgage rates [6] - President Trump has been advocating for rate cuts and has exerted pressure on the Federal Reserve, including attempts to influence its leadership [7]

Financial Data and Key Metrics Changes - The company experienced a 3% decline in net sales, excluding currency effects, due to negative consumer sentiment impacting global industry demand [10] - Ongoing earnings per share were reported at $1.34, negatively impacted by approximately $0.35 from a noncash loss associated with a minority interest in Becker Europe BV [11] - Free cash flow was unfavorable compared to the prior year by approximately $140 million, driven by seasonal inventory build [11] Business Line Data and Key Metrics Changes - MDA North America saw a 5% decline in net sales year over year, with EBIT margin approximately 6% [15][16] - MDA Latin America experienced a 1% decline in net sales year over year, with EBIT margin at 6% [17] - MDA Asia reported a 4% decline in net sales year over year, but achieved over 7% EBIT margin with 90 basis points of margin expansion [19] - SDA global business delivered 8% net sales growth year over year, driven by direct-to-consumer sales growth [20] Market Data and Key Metrics Changes - Asian appliance imports were estimated to approach the highest level on record during the first half of the year, contributing to promotional intensity [6] - The overall industry is expected to be flat to down 3% globally, with MDA North America and Latin America also expected to be flat to down 3% and 5% respectively [45][46] Company Strategy and Development Direction - The company is focused on new product introductions, with over 30% of North American products transitioning to new products in 2025, marking the largest product portfolio refresh in over a decade [21] - The company aims to leverage its strong U.S.-based manufacturing footprint to benefit from new tariff and trade policies [22][24] - The company is committed to investing in innovative products and reducing debt levels while maintaining a healthy dividend [49][50] Management's Comments on Operating Environment and Future Outlook - Management noted that macroeconomic uncertainty, elevated interest rates, and evolving trade policies have negatively impacted consumer sentiment [5] - The company expects meaningful improvement in the North American business as the full impact of tariffs kicks in later this year [7] - Management remains confident in the long-term fundamentals of the housing market and believes the company is well-positioned to benefit from eventual recovery [25][34] Other Important Information - The company updated its full-year guidance, expecting approximately flat net sales of $15.8 billion in 2025, reflecting strong new product pipeline offset by worsening global consumer sentiment [41] - The company plans to adjust the annual dividend rate to $3.60 per share starting in the third quarter to create capacity for future investments and debt repayment [51][96] Q&A Session Summary Question: Estimate of pull forward tariff-free imported product currently on the ground - Management indicated that it is difficult to provide an exact estimate but noted a significant imbalance between declared sell-in and actual sell-out, with a potential 60 to 90 days of inventory from excess Asian imports [59][61] Question: Promotional calendar and second half outlook - Management stated that they significantly reduced promotional efforts in Q2 and do not expect a completely different behavior in the second half, anticipating a more muted promotional environment [62][64] Question: North America major margins and guidance - Management confirmed that the adjustment in guidance reflects continued delays for tariffs, with no change in the fundamental investment story [76][78] Question: Performance of SDA business and back half outlook - Management expressed satisfaction with SDA performance, driven by new product momentum and direct-to-consumer growth, while noting that the segment is back half loaded [88][90] Question: Update on India sale - Management expects proceeds from the India sale to be in the $550 million to $600 million range, with closure anticipated by the end of the year [110][112] Question: Confidence in pricing actions to offset tariffs - Management confirmed that necessary pricing actions have been implemented to offset tariffs, although the impact was masked by a loss in product mix [114]

Core Viewpoint - The housing market in March showed significant improvement, with an increase in the number of cities experiencing rising home prices, indicating a positive trend in the real estate sector [1][4]. Summary by Category Housing Market Activity - In March, 24 out of 70 major cities saw new home prices rise month-on-month, an increase of 6 cities from the previous month. For second-hand homes, 10 cities experienced price increases, up by 7 cities [2]. - First-tier cities have seen new home prices rise for four consecutive months, while second-hand home prices shifted from decline to increase [1][4]. Price Changes - New home prices in first-tier cities rose by 0.1% month-on-month in March, with Shanghai and Shenzhen increasing by 0.7% and 0.1%, respectively. Beijing and Guangzhou saw declines of 0.2% and 0.1% [2]. - Second-hand home prices in first-tier cities turned from a decline of 0.1% to an increase of 0.2% in March, with Beijing, Shanghai, and Shenzhen showing increases of 0.5%, 0.4%, and 0.3%, respectively [2][3]. Year-on-Year Comparisons - Year-on-year, new home prices in first-tier cities fell by 2.8%, with Shanghai increasing by 5.7% while Beijing, Guangzhou, and Shenzhen saw declines [3]. - Second-hand home prices in first-tier cities decreased by 4.1% year-on-year, with declines in Beijing, Shanghai, Guangzhou, and Shenzhen [3]. Market Outlook - Analysts suggest that the positive changes in March indicate a recovery in the housing market, with expectations for continued improvement in the second quarter [4][5]. - The upcoming quarter is traditionally a slow season for transactions, but the introduction of new quality housing projects is expected to support new home prices and improve market conditions [5].