Download PDF

1. Company Snapshot

1.a. Company Description

The Home Depot, Inc.operates as a home improvement retailer.It operates The Home Depot stores that sell various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products The company also offers installation services for flooring, cabinets and cabinet makeovers, countertops, furnaces and central air systems, and windows.


In addition, it provides tool and equipment rental services.The company primarily serves homeowners; and professional renovators/remodelers, general contractors, maintenance professionals, handymen, property managers, building service contractors, and specialty tradesmen, such as electricians, plumbers, and painters.It also sells its products through websites, including homedepot.com; blinds.com, an online site for custom window coverings; and thecompanystore.com, an online site for textiles and décor products.


As of December 31, 2021, the company operated 2,317 stores in the United States.The Home Depot, Inc.was incorporated in 1978 and is based in Atlanta, Georgia.

Show Full description

1.b. Last Insights on HD

The Home Depot's recent performance was negatively impacted by a downbeat earnings report and guidance, causing a sell-off. The company's Q3 results were affected by missed storm-driven demand, consumer uncertainty, and housing-market pressures. The CEO issued cautionary comments on housing demand and cut the profit outlook, citing consumers pulling back on discretionary home-improvement spending. Additionally, institutional investors, such as Alteri Wealth LLC, have reduced their stakes in the company, selling 322 shares during the period. Margin pressure and weak demand have also been cited as concerns.

1.c. Company Highlights

2. The Home Depot's Q3 Earnings: A Mixed Bag

The Home Depot reported third-quarter sales of $41.4 billion, a 2.8% increase from the same period last year, with comp sales rising 0.2% and U.S. comps up 0.1%. Adjusted diluted earnings per share were $3.74, compared to $3.78 in the third quarter last year. The company's results missed expectations due to a lack of storms, which pressured certain categories, and consumer uncertainty impacting home improvement demand. The actual EPS came in at $3.74, below estimates of $3.84.

Publication Date: Nov -19

📋 Highlights
  • GMS Acquisition Impact:: The $2 billion incremental sales contribution from GMS in fiscal 2025 is expected to offset a high single-digit percentage decline year-over-year.
  • Sales Growth and EPS Guidance:: Total sales growth targets 3% in fiscal 2025, with adjusted EPS declining ~5% due to GMS transaction fees and margin pressures.
  • Storm-Driven Sales Pressure:: Lack of storms reduced same-store sales by 80 basis points in Q3 and is projected to remain a headwind into Q4 and 2025.
  • Inventory and ROI Trends:: Merchandise inventories rose $2.3 billion to $26.2 billion, while return on invested capital fell to 26.3% from 31.5% in Q3 2024.
  • Big-Ticket Sales Momentum:: Transactions over $1,000 grew 2.3%, driven by appliances and power tools, supported by Pro initiatives like managed accounts and cross-selling.

Financial Performance

The company's gross margin was impacted by the lack of storm activity, and operating expenses were affected by GMS transaction fees, which were about $0.05 of EPS for the year. Return on invested capital was 26.3%, down from 31.5% in the third quarter of fiscal 2024. The company's merchandise inventories were $26.2 billion, up $2.3 billion compared to the third quarter of 2024.

Guidance and Outlook

For fiscal 2025, The Home Depot expects total sales growth of approximately 3%, with GMS contributing $2 billion in incremental sales, and comp sales growth to be slightly positive. The gross margin is expected to be around 33.2%, operating margin around 12.6%, and adjusted operating margin around 13%. The company expects diluted earnings per share to decline approximately 6% and adjusted diluted earnings per share to decline approximately 5% compared to fiscal 2024. Analysts estimate next year's revenue growth at 3.6%.

Valuation

With a P/E Ratio of 22.89 and an EV/EBITDA of 14.05, the market seems to be pricing in a certain level of growth for The Home Depot. The company's ROIC is 19.72%, and ROE is 156.06%, indicating a strong return on equity. The Dividend Yield is 2.72%, providing a relatively stable source of return for investors.

Operational Highlights

The company opened 3 new stores in the quarter, bringing the total store count to 2,356. The success of its Pro initiatives, including managed accounts and larger Pro complex purchases, is driving big-ticket sales. The company's wholesale and retail businesses have different margin structures, and it is driving synergies between the two platforms, including cross-selling and operational efficiencies.

GMS Acquisition

The acquisition of GMS, a leading distributor of specialty building products, was completed in September. GMS continues to take share, and The Home Depot feels great about that business going forward. The company sees opportunities for cross-selling between GMS and SRS, with examples of successful account handoffs and engagements between the outside sales forces.

3. NewsRoom

Card image cap

Market Today: WBD Sale Bids, Meta Cuts, Apple Shake-Up

Dec -04

Source: gurufocus.com

Card image cap

First Look: Insurers, Auto Rules, AI and Fed Jitters

Dec -04

Source: gurufocus.com

Card image cap

HD Investors Have Opportunity to Join The Home Depot, Inc. Fraud Investigation with the Schall Law Firm

Dec -03

Source: businesswire.com

Card image cap

Home Depot: Risk-Reward Not Attractive Relative To The Market

Dec -03

Source: seekingalpha.com

Card image cap

Home Depot: Stock Turn Anticipates Housing Recovery But Is Still Expensive

Dec -02

Source: seekingalpha.com

Card image cap

Powering More Projects at Home: Instacart Announces Nationwide Partnership with The Home Depot Canada

Dec -02

Source: prnewswire.com

Card image cap

Is Home Depot Facing a Structural Demand Reset After Soft Q3 Comps?

Dec -01

Source: zacks.com

Card image cap

The Home Depot, Inc. $HD is Capital Counsel LLC NY’s 10th Largest Position

Dec -01

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.54%)

6. Segments

U.S., Canada, and Mexico

Expected Growth: 3.5%

The Home Depot's growth in the U.S., Canada, and Mexico is driven by a 3.5% increase in same-store sales, fueled by a strong housing market, improving consumer confidence, and investments in e-commerce and technology. Additionally, strategic expansions and acquisitions in Canada and Mexico contribute to growth, while a focus on customer service and supply chain optimization enhances overall performance.

Other

Expected Growth: 4.5%

The Home Depot's 'Other' segment growth of 4.5% is driven by increased demand for emerging categories like smart home products and augmented reality experiences. Additionally, the company's expansion into new markets and strategic investments in e-commerce and digital transformation have contributed to this growth.

7. Detailed Products

Lumber

A wide selection of lumber products, including dimensional lumber, plywood, and oriented strand board (OSB)

Building Materials

A variety of building materials, including drywall, roofing, and insulation

Kitchen and Bath

A wide range of kitchen and bath fixtures, including cabinets, countertops, and appliances

Paint and Decorating

A variety of paint, stains, and decorating supplies

Electrical

A wide selection of electrical supplies, including lighting, outlets, and switches

Plumbing

A variety of plumbing supplies, including pipes, fittings, and fixtures

Hardware

A wide range of hardware supplies, including tools, fasteners, and building materials

Lawn and Garden

A variety of lawn and garden supplies, including plants, gardening tools, and outdoor decor

Appliances

A wide selection of appliances, including refrigerators, ovens, and dishwashers

Home Services

A range of home services, including installation, repair, and maintenance

8. The Home Depot, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes is low for The Home Depot, Inc. because the company's products are highly specialized and there are limited alternatives available to customers.

Bargaining Power Of Customers

The bargaining power of customers is medium for The Home Depot, Inc. because while customers have some flexibility to shop around, the company's strong brand and wide product offerings limit their bargaining power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low for The Home Depot, Inc. because the company is a large and important customer for many suppliers, giving it significant negotiating power.

Threat Of New Entrants

The threat of new entrants is low for The Home Depot, Inc. because the company has significant barriers to entry, including high startup costs and the need for a large distribution network.

Intensity Of Rivalry

The intensity of rivalry is high for The Home Depot, Inc. because the company operates in a highly competitive industry with several large and established competitors.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 97.58%
Debt Cost 4.89%
Equity Weight 2.42%
Equity Cost 9.01%
WACC 4.99%
Leverage 4038.41%

11. Quality Control: The Home Depot, Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Booking

A-Score: 6.3/10

Value: 3.8

Growth: 8.7

Quality: 8.0

Yield: 1.0

Momentum: 7.5

Volatility: 8.7

1-Year Total Return ->

View Full Report
Stock-Card
PulteGroup

A-Score: 5.8/10

Value: 5.9

Growth: 8.8

Quality: 7.6

Yield: 2.0

Momentum: 4.0

Volatility: 6.3

1-Year Total Return ->

View Full Report
Stock-Card
Lowe's

A-Score: 5.6/10

Value: 5.7

Growth: 6.7

Quality: 5.5

Yield: 4.0

Momentum: 3.0

Volatility: 9.0

1-Year Total Return ->

View Full Report
Stock-Card
Lennar

A-Score: 5.4/10

Value: 7.5

Growth: 7.2

Quality: 7.1

Yield: 3.0

Momentum: 1.5

Volatility: 6.3

1-Year Total Return ->

View Full Report
Stock-Card
Home Depot

A-Score: 5.3/10

Value: 2.4

Growth: 6.0

Quality: 5.5

Yield: 4.0

Momentum: 4.0

Volatility: 10.0

1-Year Total Return ->

View Full Report
Stock-Card
Haverty Furniture

A-Score: 4.8/10

Value: 3.9

Growth: 3.4

Quality: 3.8

Yield: 9.0

Momentum: 3.0

Volatility: 5.7

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

354.61$

Current Price

354.61$

Potential

-0.00%

Expected Cash-Flows