Home Depot Pre-Q4 Earnings: Is it Wise to Buy Before the Release?

The Home Depot, Inc. HD is set to report fourth-quarter fiscal 2025 results on Feb. 24, before market open. The company’s top and bottom lines are expected to have declined year over year in the to-be-reported quarter. The Zacks Consensus Estimate for fiscal fourth-quarter revenues is pegged at $38.25 billion, indicating a decline of 3.7% from that reported in the year-ago quarter.The Zacks Consensus Estimate for quarterly earnings per share (EPS) of $2.51 suggests a decline of 19.8% from the year-ago period’s reported figure. The consensus estimate for EPS has been unchanged in the past 30 days.For fiscal 2025, the Zacks Consensus Estimate for revenues is pegged at $164.7 billion, indicating growth of 3.3% from that reported in the year-ago quarter. The Zacks Consensus Estimate for fiscal 2025 EPS of $14.50 suggests a decline of 4.9% from the year-ago period’s reported figure. The consensus estimate for EPS has been unchanged in the past 30 days.The Atlanta, GA-based leading home improvement retailer delivered a trailing four-quarter average negative earnings surprise of 0.09%. In the last reported quarter, the company delivered a negative earnings surprise of 1.8%.HD’s Earnings WhispersOur proven model conclusively predicts an earnings beat for Home Depot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.Home Depot has an Earnings ESP of +5.61% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.Trends to Monitor Before HD’s Q4 EarningsHome Depot’s fourth-quarter fiscal 2025 results are expected to reflect top-line and comparable sales (comps) growth, driven by the contributions from the recent acquisition of GMS Inc. and steady underlying customer engagement across Pro and DIY. On the last reported quarter’s earnings call, management highlighted that consistent customer engagement in smaller repair and maintenance projects continues to provide stability, even as larger discretionary spending remains soft.Home Depot remains committed to advancing its strategic initiatives, even amid economic uncertainty and a challenging high-interest-rate environment that has affected home improvement demand. The company’s key priorities include enhancing the interconnected shopping experience, expanding its Pro wallet share through a robust ecosystem of capabilities, and investing in store development.HD is progressing well with its "One Home Depot" investment plan, which focuses on expanding supply-chain facilities, investing in technology and enhancing the digital experience. The interconnected retail strategy continues to be a key driver of growth, ensuring a seamless shopping experience across digital and physical channels. The company remains committed to enhancing its omnichannel capabilities.On the last reported quarter’s earnings call, management anticipated sales to increase 3% year over year. The increase reflects a $2-billion incremental sales contribution from GMS. The company expects comps to increase slightly for the 52 weeks of fiscal 2025. Our model predicts comps to increase 0.3% each in the fourth quarter and fiscal 2025.The Home Depot, Inc. Price and EPS Surprise  The Home Depot, Inc. price-eps-surprise | The Home Depot, Inc. QuoteHowever, the company continues to grapple with ongoing challenges, including softened big-ticket and discretionary projects demand, which have impacted both total and comparable sales. Macroeconomic pressures are also weighing on profitability. Elevated interest rates continue to influence consumer behavior and financing expenses. The company expects net interest expenses to increase year over year in the near term.Home Depot has been seeing soft engagement for big-ticket discretionary categories, such as kitchen and bath remodels, as higher interest rates discouraged financing-dependent projects. Another major negative theme for HD is the absence of typical storm activity, which materially hurt third-quarter fiscal 2025 results. Home Depot highlighted that fall storms, normally a catalyst for repair, recovery and replacement categories, were virtually non-existent. This led to pronounced weakness in several high-volume departments, including roofing, lumber and other storm-driven repair items.Management noted that without storm-related demand, many seasonal and emergency-repair categories underperformed, and this headwind is expected to continue into the fiscal fourth quarter. The company emphasized that storm variability is outside its control but remains a meaningful earnings driver, making the business more vulnerable when weather patterns do not cooperate.On the last reported quarter’s earnings call, the company highlighted that it expects continued pressure in the fiscal fourth quarter due to the absence of major storm activity, ongoing consumer uncertainty, and softness in the housing market, along with the added impacts of integrating GMS. Management emphasized that the pressure in big-ticket discretionary categories reflects broader caution in the housing market, and improvement may depend on a more supportive macro backdrop, which remains uncertain.  For fiscal 2025, the company expects a gross margin of 33.2%. HD estimates an operating margin of 12.6%, with an adjusted operating margin of 13%. Home Depot anticipates EPS to decline 6% year over year for fiscal 2025, while adjusted EPS is estimated to fall 5% year over year.Our model predicts a gross margin of 32.3% for the fiscal fourth quarter, contracting 50 bps year over year. For fiscal 2025, the gross margin is expected to decline 20 bps year over year to 33.2%. We expect adjusted operating income to decline 15.7% in the fiscal fourth quarter, with a 140-bps decline in the operating margin to 10.3%. For fiscal 2025, the adjusted operating margin is expected to decline 80 bps year over year to 13%.HD’s Price Performance & ValuationHome Depot’s shares have gained 14.5% in the past three months compared with the industry’s 17.6% rally. However, the HD stock has outperformed the S&P 500 and the Retail-Wholesale sector’s growth of 3.2% and 3.7%, respectively, in the same period.The Home Depot stock has underperformed its arch-rival Lowe’s Companies Inc. LOW, which rallied 23.1% in the past three months. Meanwhile, HD has outperformed FGI Industries FGI and Ethan Allen Interiors Inc. ETD, which have risen 11.3% and 6%, respectively, in the same period.At the current price of $383.04, HD trades 10.2% below its 52-week high mark of $426.75, reflecting upside potential.HD’s 3-Month Stock Performance Image Source: Zacks Investment Research Home Depot’s current valuation appears quite pricey. The company trades at a forward 12-month P/E multiple of 25.2X, exceeding the industry average of 23.52X and below the S&P 500’s average of 22.51X. Image Source: Zacks Investment Research Given the premium valuation, investors may face significant risks if the company's future performance does not meet expectations. The retail market is becoming increasingly competitive and Home Depot’s initiatives may not suffice to drive significant growth. Macroeconomic challenges and heightened competition can impede the company's ability to sustain its current growth trajectory.Investment ThesisHome Depot continues to demonstrate solid revenue growth and profitability, driven by its dominant position in the home improvement industry and the effective execution of its “One Home Depot” strategy. Strategic investments in digital infrastructure, supply-chain optimization and in-store technology have strengthened its ability to serve both do-it-yourself consumers and professional contractors with speed and efficiency.The company’s integrated model, seamlessly connecting physical stores with a powerful online platform, has enhanced customer experience and boosted digital engagement. Its expanding Pro ecosystem, bolstered by the acquisition of SRS Distribution, further reinforces Home Depot’s leadership in building materials and its appeal among trade professionals.Although short-term headwinds such as softer discretionary spending and macroeconomic uncertainty may temper near-term growth, Home Depot’s market leadership, operational discipline and innovation-driven approach position it strongly for long-term value creation. The company remains well-equipped to capture opportunities as home-improvement demand normalizes and professional project activity rebounds.ConclusionAs Home Depot heads into its fourth-quarter fiscal 2025 earnings release, investors are keen to see if the retail giant can meet expectations amid a mixed consumer backdrop. While near-term expectations call for year-over-year declines in revenues and earnings, several constructive trends could support Home Depot’s fiscal fourth-quarter performance.Continued engagement in smaller repair and maintenance projects has provided stability, particularly across Pro and DIY customers. The incremental contribution from GMS, along with steady progress under the “One Home Depot” strategy, strengthens the company’s supply chain, digital capabilities and interconnected retail ecosystem. Expansion of the Pro ecosystem and ongoing investments in technology and omnichannel execution position the business to capture wallet share and drive efficiency gains.That said, headwinds remain meaningful. Soft demand in big-ticket discretionary categories, elevated interest rates, storm-related volatility and housing market uncertainty continue to weigh on comps and margins. Higher net interest expenses and integration costs also pressure profitability. Even so, Home Depot’s scale, operational discipline and strategic investments provide a solid foundation, potentially enabling results to come in bettesr than feared despite the challenging backdrop.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Lowe's Companies, Inc. (LOW): Free Stock Analysis Report The Home Depot, Inc. (HD): Free Stock Analysis Report Ethan Allen Interiors Inc. (ETD): Free Stock Analysis Report FGI Industries Ltd. (FGI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks