Home Depot Earnings: Pro Growth Inroads Set to Benefit When Housing Market Picks Up

Key Morningstar Metrics for Home Depot

• Fair Value Estimate: $308.00
• Morningstar Rating: ★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Low

What We Thought of Home Depot’s Earnings

Home Depot’s HD second-quarter sales rose 4.9% on 1.0% same-store sales growth and the benefit of a full quarter of SRS Distribution sales. Steadily improving demand allowed the firm to maintain its 2025 outlook, including 2.8% sales and 1% comparable growth and a 13.4% adjusted operating margin.

Why it matters: A chronically ill housing market persists, with existing-home sales struggling to find growth despite moderating price increases and mortgage rates. Still, helped by product breadth, Home Depot is gaining market share, outpacing the 1% industry decline in the quarter.

• Same-store sales should pick up modestly over the remainder of 2025 and accelerate as rates become more accommodative. Further, the firm is set to benefit from a wider customer base, sales team, and distribution network once the GMS acquisition is completed.

The bottom line: We plan to raise our $308 fair value estimate for wide-moat Home Depot by a high-single-digit rate. This stems from time value and the benefit of sales and profit from the GMS acquisition, which was announced June 30 and is set to close by fiscal year-end.

• Even so, we see the shares as rich at 27 times 2025 adjusted earnings per share, above the 23 average over the past decade. To reach today’s price, Home Depot would have to capture same-store sales growth of 5% and operating margins above 15% consistently, which we believe is unlikely, given ongoing investments.
• We are also set to change our Uncertainty Rating to Medium from Low to account for variability around tariffs and the macroeconomic environment, which could result in a protracted period of consumer hesitancy. This change aligns with our quantitative methodology.

Between the lines: For 2026, we expect to add around $5.5 billion in incremental sales from GMS, which carried an adjusted operating margin below 10% in its most recent year. We also plan to lift long-term comp growth to 4% from 3.5% to account for a better opportunity set.