Core Insights - Home Depot's stock has experienced a decline of 7.3% over the past month, underperforming the industry average decline of 6.8% [1] - The stock closed at $397.02 on October 1, 2025, falling below its 50-day simple moving average (SMA) of $399.79, indicating a bearish sentiment [1][2] - Despite short-term challenges, Home Depot remains above its 200-day SMA, suggesting a more favorable long-term outlook [2] Recent Performance - Over the past three months, Home Depot's shares have risen by 5.9%, outperforming the Zacks Retail – Home Furnishings industry's growth of 3.4% but lagging behind the broader Zacks Retail-Wholesale sector and S&P 500, which grew by 8.5% and 9.4%, respectively [6] - Compared to competitors, Home Depot's performance is weaker, with Lowe's and FGI Industries showing gains of 8.1% and 56.6%, respectively, while Floor & Decor Holdings saw a decline of 12.5% [7] Technical Analysis - The drop below the 50-day SMA indicates a shift from short-term bullish to bearish sentiment, reflecting decreased investor confidence and slower buying interest [2][9] - Home Depot's stock is currently trading at $389.33, which is 19.3% above its 52-week low of $326.31 and 11.4% below its 52-week high of $439.37 [10] Financial Outlook - Home Depot anticipates a flat gross margin of 33.4% and an adjusted operating margin of 13.4% for fiscal 2025, facing cost pressures from logistics, wages, and amortization [12] - Inventory levels increased by $1.8 billion year-over-year in Q2 fiscal 2025, raising markdown risks, with management projecting only 1% comparable sales growth and a 2% decline in adjusted EPS for fiscal 2025 [13] Long-Term Fundamentals - Despite short-term challenges, Home Depot's fundamentals indicate long-term strength, with a 4.9% year-over-year sales increase in Q2 fiscal 2025 and a 1% increase in comparable sales [14] - The company's integrated retail model and ongoing investments in supply-chain efficiency and AI-driven logistics are enhancing operational resilience and customer satisfaction [17] Valuation Metrics - Home Depot currently trades at a forward 12-month price-to-sales (P/S) multiple of 2.29X, above the industry average of 1.65X, but slightly below its median P/E level of 2.36X from the past year [18] - The Zacks Consensus Estimate for Home Depot's fiscal 2025 EPS remains steady at $15.03, indicating a year-over-year decline of 1.4%, while the fiscal 2026 EPS estimate suggests growth of 8.5% [19] Market Position - Home Depot's recent slip below the 50-day SMA signals near-term weakness, but its fundamentals and market position suggest resilience and potential for long-term growth [22][23] - Investments in supply-chain modernization and omnichannel capabilities provide a solid foundation for sustained growth, despite potential near-term volatility [24]

Core Viewpoint - The second-quarter earnings season is concluding, with over 90% of S&P 500 companies reporting results, and the retail sector is prominently featured this week [1] Company Performance: Home Depot - Home Depot reported its second consecutive earnings miss, with adjusted EPS of $4.68 compared to expectations of $4.71, reflecting a 0.64% miss, and total revenues of $45.28 billion versus $45.51 billion, a 0.5% miss [6] - The company experienced a 0.86% increase in net income year-over-year and a 4.9% increase in revenues compared to the second quarter of 2024 [6] - Comparable sales increased by 1.0%, with U.S. comparable sales rising by 1.4%, although foreign exchange rates negatively impacted total comparable sales by approximately 40 basis points [7] - Home Depot reaffirmed its guidance for total sales growth of approximately 2.8% for the fiscal year, with comparable sales growth of 1.0% and an expected adjusted EPS decline of 2% to $15.24 [9] - The company is facing challenges from elevated interest rates and a slowdown in the home improvement sector, which has seen reduced demand due to high mortgage rates and rising home prices [4][10] Industry Context: Home Improvement Sector - The home improvement sector is currently ranked in the bottom 16% of approximately 250 Zacks Ranked Industries, with most stocks considered overvalued and expected to experience below-average earnings growth [3] - The sector has been adversely affected by a broader operating environment characterized by high interest rates and weak discretionary spending, leading to a slowdown in large-scale home remodeling projects [4] - Despite the challenges, the aging housing stock and rising home equity levels are expected to support long-term demand in the home improvement market [18] Upcoming Performance: Lowe's - Lowe's is expected to report second-quarter earnings of $4.24 per share, a 3.41% improvement year-over-year, with revenues anticipated to climb 1.47% to $23.93 billion [12][15] - The company has not missed earnings estimates since 2019 and has a trailing four-quarter average earnings surprise of 3.22% [13] - Lowe's has expanded its reach to larger professional customers through the acquisition of Artisan Design Group, which is expected to enhance its capabilities in new home construction and large-scale renovation projects [16]