TLDR
- Home Depot stock fell 2.4% in pre-market trading after releasing weak guidance ahead of its investor day
- The company projects adjusted earnings per share growth between 0% and 4% for fiscal year 2027, following an expected 5% drop this fiscal year
- Comparable sales are expected to remain flat to 2% growth, below Wall Street’s expectations of 5% EPS growth
- Home Depot reaffirmed flat comparable sales guidance for fiscal 2026, confirming the housing market remains frozen
- The company offered a “Market Recovery Case” with 4-5% comparable sales growth but provided no timeline for when this recovery might occur
Home Depot stock dropped 2.4% in pre-market trading after the retailer released disappointing guidance ahead of its first investor day in over two years. The update confirmed what many investors feared: the home improvement market remains stuck in neutral.
The company reaffirmed its guidance for the fiscal year ending February 1, 2026, projecting roughly flat comparable sales. For the following fiscal year ending February 2027, the outlook barely improved. Home Depot expects adjusted earnings per share growth between 0% and 4%, following an expected 5% drop this current fiscal year.
Comparable sales growth is projected to land between flat and 2%. Total sales growth sits at 2.5% to 4.5%. These numbers fall well below Wall Street’s expectations, which currently anticipate around a 5% jump in EPS for next fiscal year.
Gordon Haskett analyst Chuck Grom described the guidance as a “reality check that home improvement remains frozen.” The weak housing market continues to dampen consumer appetite for renovation projects. CEO Ted Decker previously noted that the expected third-quarter inflection in demand “did not materialize.”
Low Growth Targets Miss Wall Street Projections
D.A. Davidson analyst Michael Baker acknowledged the guidance may “clip the stock” on Tuesday. However, he noted that setting a “lower initial bar” for the coming quarters could work in the company’s favor. The past few years have been rough for home improvement retailers.
Industry insiders hoped the Federal Reserve’s rate-cutting cycle would reignite both the housing market and home-improvement sales. That hasn’t happened yet. The weak housing market has kept consumers from spending on renovation projects.
At November’s earnings call, Decker admitted the projected demand upturn never came. Those comments, combined with an earnings miss, pushed shares lower. The stock has dropped about 10% this year.
Home Depot did provide one bright spot in its guidance. The company outlined a “Market Recovery Case” for when the housing market finally rebounds. In this scenario, Home Depot expects comparable sales growth of 4% to 5% and adjusted EPS growth in the mid-to-high single digits.
Pro Ecosystem Strategy Takes Center Stage
Chief Financial Officer Richard McPhail explained the recovery case. “Our Market Recovery Case reflects our performance expectations once we see momentum in housing activity and increased spend on larger projects driven by pent-up demand,” he said. McPhail added that the company expects to grow faster than the general market once housing pressures correct.
The catch? Home Depot didn’t provide a timeline for when this recovery might happen.
Investors now look to hear more about the company’s long-term strategy at the investor day. Evercore ISI analyst Greg Melich predicts management will focus on building out a complete “Pro ecosystem.” This includes gaining more market share in the do-it-yourself segment.
The strategy involves supply-chain enhancements and increasing Pro-focused digital capabilities. Home Depot wants to make it easier to support larger and more complex projects. Recently acquired businesses SRS Distribution and GMS play a key role in this plan.
Analysts expect more details on how these acquisitions fit into the broader strategy. While management provided some initial information, investors want specifics on integration and expected benefits.
The company maintains it’s focused on “controlling what we can control” while the housing market remains weak. Wall Street continues watching for any signs of improvement in home improvement demand.
Analyst sentiment toward Home Depot rates as a Moderate Buy based on 24 Wall Street analysts tracked over the last three months. Of these ratings, 18 analysts call it a Buy, five recommend a Hold, and one recommends a Sell. The average 12-month price target sits at $407.62, implying upside potential of 15.77% from the current price.
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