Ahead of Earnings, Is Home Depot Stock a Buy, a Sell, or Fairly Valued?

Home Depot is set to release its third-quarter 2025 earnings report on Nov. 18. Here’s Morningstar’s take on what to look for in Home Depot’s earnings and the outlook for its stock.

Key Morningstar Metrics for Home Depot

• Fair Value Estimate: $335.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

Home Depot Earnings Release Date

• Tuesday, Nov. 18, before start of trading

What to Watch for in Home Depot’s Q3 Earnings

• Have lower rates encouraged more large projects? The cost of financing bigger home improvement projects has weighed on project size in recent periods.
• We’re looking for any update on the pro outlook with the GMS acquisition now completed. In September 2025, Home Depot closed an enterprise value (including net debt) deal of approximately $5.5 billion to capture increasing exposure to specialty building products including drywall, ceilings, steel framing, and other remodeling projects.
• We’d like any commentary about the potential for 2026 if rates continue to ease.

Fair Value Estimate for Home Depot

With its 2-star rating, we believe Home Depot’s stock is moderately overvalued compared with our long-term fair value estimate of $335 per share. For 2025, we made little change to our forecast, as DIY consumers continue to feel pressure from high interest rates and macroeconomic uncertainty. Management maintained its fiscal 2025 guidance of 2.8% total sales growth, with comparable sales growing just 1%.

Read more about Home Depot’s fair value estimate.

Economic Moat Rating

We assign Home Depot a wide economic moat rating. As the largest global home improvement retailer, Home Depot possesses a competitive edge owing to its brand intangible asset and cost advantage, in our view. Over the past 10 years, Home Depot’s sales growth has outpaced the building materials and garden equipment and supplies dealer industry’s average growth of 5.4% by 150 basis points annually (based on the US Census Bureau data), an indication of the brand’s ongoing relevance.

We expect Home Depot’s strong brand equity and extensive scale should enable incremental market share gains in the highly fragmented $1 trillion North American home improvement market, on top of the roughly 17% market share it has amassed thus far (given more than $159 billion in sales in 2024).

Read more about Home Depot’s economic moat.

Financial Strength

Home Depot has had no concerns tapping the credit markets to finance its business in recent years. The firm raised $10 billion in debt during the first half of 2024 to finance part of the $18.25 billion SRS Distribution acquisition. This left a total debt above $53 billion at the end of 2024. Management has halted share repurchases with higher expected debt service as a result of the SRS acquisition; however, we model share repurchases to resume at the end of 2026, after the GMS transaction has closed and cash flows are more certain. Including the impact of the SRS acquisition, EBIT is forecast to cover the net interest expense 10 times at the end of 2025.

Read more about Home Depot’s financial strength.

Risk and Uncertainty

We give the company a Medium Uncertainty Rating, owing to its strong brand recognition, which has helped stabilize sales through the cycle. Home Depot’s sales are largely driven by greater consumer willingness to spend on category goods in both necessary and discriminatory home purchases. Thanks to the MRO and pro business (HD Supply and SRS), revenue could be less cyclical, as the maintenance side of the business can prove more consistent.

In uncertain economic times, consumers remain in their homes, embarking on improvement projects, boosting DIY revenue. Alternatively, when home prices rise, the wealth effect generates a psychological boost to consumers, reinvigorating professional sales thanks to a higher willingness to spend on big home improvement projects.

Read more about Home Depot’s risk and uncertainty.

HD Bulls Say

• Home Depot’s continued investments in supply chain and merchandising should improve productivity and support its leadership position in the home improvement market.
• The firm has returned $73 billion to its shareholders through dividends and share buybacks over the past five years, around 20% of its market cap. We forecast Home Depot returning $76 billion to owners over the next five years.
• The addressable MRO market is about $150 billion. As Interline and HD Supply make up a low-double-digit share, SRS reaches a new end user, and GMS joins the mix, there is share up for grabs.

HD Bears Say

• Weak consumer spending, higher interest rates, or an economic downturn could hinder sales for home improvement projects and affect Home Depot’s growth.
• IT and supply chain improvement gains could prove more challenging to achieve, as simpler efforts have already borne fruit. Further productivity efforts could face some implementation risks, creating inconsistent profitability.
• As Home Depot digests more than one sizable acquisition, integration risk remains, and management could be distracted by idiosyncratic issues at larger tie-ups like SRS or GMS.

This article was compiled by Frank Lee.