Home Depot: We Expect Another Quarter of Professional Outperformance as DIY Muddles Along

We're holding firm on our $292 fair value estimate for wide-moat Home Depot ahead of the fourth-quarter earnings release on Feb. 25. We consider the shares to be overvalued. We expect 11% sales growth for the quarter, to nearly $39 billion, benefiting from an extra week in the reporting period and sales from the SRS Distribution acquisition. If we carve out these idiosyncrasies, we expect a sales decrease of 0.6% on a comparable sales decline of 2.7%. We anticipate fourth-quarter results will rely on professional business demand, as do-it-yourself customers have paused big-ticket discretionary projects, which are often financed. Demand from pros should have held up in 2024’s final quarter, given that existing-home sales volume has returned to positive year-over-year growth. With housing turnover likely stabilized at depressed levels, we still think Home Depot should be primed to capitalize on its pro cohort with continued enhancements.