The Home Depot stock gains on earnings beat despite offering weak housing outlook

• The Home Depot reports Q4 rise of 11% on adjusted EPS and 14% on revenue from a year earlier.
• HD stock lifted 3.8% on Tuesday as the DIY home improvement retailer beats consensus.
• CFO McPhail says home improvement sales should make up for poor housing market.
• US comparable sales rise 1.3% compared with -1.3% dip in Q3.

 

The Home Depot (HD) stock advanced 3.8% on Tuesday after releasing fiscal fourth-quarter earnings in the premarket. The market chose to ignore CFO Richard McPhail’s admission to CNBC that the United States (US) housing market is unlikely to recover in 2025. Instead, investors focused on the improvement in comparable sales, which had dropped in the previous quarter.

Like The Home Depot, competitor Lowe’s (LOW) stock price dipped in the premarket on McPhail’s statement but eventually added more than 2% by the late morning trade.

The Dow Jones Industrial Average (DJIA) is slightly lower at the time of writing as President Donald Trump has promised that his delayed 25% tariffs on Canada and Mexico will go into effect next week 

On top of that, headlines emerged that the administration is planning to increase Biden-era restrictions on Chinese purchases of US semiconductors. These toughened rules could include lower thresholds for the number of chips that can be purchased without a license, as well as possible sanctions on specific Chinese corporations. The NASDAQ fell more than 1.7% on the news.

The Home Depot earnings results

The Home Depot reported adjusted earnings per share (EPS) of $3.13, which beat the Wall Street consensus by $0.09. Revenue of $39.7 billion was $630 million ahead of the average estimate.

The adjusted EPS figure gained 11% YoY, while the reported revenue rose 14% from a year earlier.

Comparable sales worldwide rose 0.8%, while US comparable sales rose 1.3%, a mirror image of the -1.3% drop in fiscal Q3.

While admitting to CNBC hosts that the US housing market was unlikely to pick up in 2025 due to the high interest rate environment and the steep cost of housing, CFO McPhail sees positive signs from the home improvement category.

"Home improvement always persists, and so the question, I think, will be around the mindset of whether long-term rates have gotten to a new normal,” said McPhail, meaning that customers might be getting used to higher interest rates.

In 2025, management expects total sales growth to drift lower from 3.4% in 2024 to 2.8% in the current fiscal year. They also expect adjusted diluted EPS to fall 2% compared with 2024 despite adding 13 new stores to its column.

The Home Depot Board raised the company’s quarterly dividend by 2.2% to $2.30 per share.

The Home Depot stock chart

The Home Depot's share price has perfectly spiked in the vicinity of the 200-day Simple Moving Average (SMA), so technical traders will be delighted if they picked up shares a day earlier just below $380.

What's more, the three most recent daily candlesticks, including Tuesday's unfinished candle, look like a Morning Star pattern. It doesn't contain the gap down or gap up from the middle candle, but the first bearish candle and the third (Tuesday) candle bear a resemblance in their long bodies. To complete the pattern, Tuesday's candle needs to close above last Friday's open at $396.40.

The first goal might be taking profits near the 100-day SMA, which lies near $407. Other levels of note include the January 27 range high near $426, while resistance appears in the region above $435 where price dynamics halted between November 26 and December 9 of last year.

 

HD daily stock chart