The Home Depot, Inc. (HD Quick QuoteHD - Free Report) is set to report second-quarter fiscal 2025 results on Aug. 19, before market open. The company’s top and bottom lines are expected to have increased year over year in the to-be-reported quarter. The Zacks Consensus Estimate for fiscal second-quarter revenues is pegged at $45.5 billion, indicating growth of 5.4% from that reported in the year-ago quarter.

The Zacks Consensus Estimate for quarterly earnings per share (EPS) of $4.71 suggests growth of 0.9% 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 earnings surprise of 2.2%. In the last reported quarter, the company delivered a negative earnings surprise of 0.8%.

HD’s Earnings Whispers

Our 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 +0.34% 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 Q1 Earnings

Home Depot’s second-quarter fiscal 2025 results are expected to reflect continued top-line recovery, supported by SRS contributions, broad-based category growth and positive Pro sales. The company is advancing its "One Home Depot" plan, focusing on supply-chain expansion, technology investments and digital enhancements. The interconnected retail strategy remains a key growth driver, ensuring a seamless shopping experience.

On the last reported quarter’s earnings call, Home Depot predicted a resilient customer base, strong market position and ongoing investments to enable market share growth and sustain profitability.

With a vast store network, a comprehensive product offering and a growing online presence, HD is well-positioned to meet evolving consumer demands. Its interconnected retail model and strong tech infrastructure have driven web traffic and supported the buildout of a scalable Pro ecosystem, solidifying its competitive advantage. Our model predicts comparable store sales to increase 5.2% in the second quarter of fiscal 2025, with a 3.2% increase in customer transactions and a 1.9% rise in average ticket.

However, the company continues to grapple with ongoing challenges, including softened demand and pressure in high-ticket discretionary categories, factors that have impacted both total and comparable sales. Macroeconomic pressures are also weighing on profitability. Elevated interest rates, which surged in early 2024, 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. With no major improvement expected in interest rates or housing turnover in 2025, the company anticipates continued pressure on big-ticket renovations, such as kitchen and bath remodels.

While Pro sales have been strong, the shift in consumer spending toward smaller-scale repairs and maintenance projects suggests that larger project demand may not rebound meaningfully in the near term, limiting growth potential in high-margin categories.

We expect operating income to increase 2.2% in the fiscal second quarter, with a decline of 40 basis points in the operating margin.

HD’s Price Performance & Valuation

Home Depot’s shares have gained 13.1% in the past year, comparing unfavorably with the S&P 500 and the Retail-Wholesale sector’s growth of 17.2% and 20.7%, respectively. The HD stock has also lagged the industry’s 6.2% rise in the same period.

However, the Home Depot stock has outpaced its arch-rival Lowe’s Companies Inc.’s (LOW Quick QuoteLOW - Free Report) growth of 6.8% in the past year. Shares of competitors FGI Industries (FGI Quick QuoteFGI - Free Report) and Floor & Decor (FND Quick QuoteFND - Free Report) recorded declines of 19.5% and 18.6%, respectively, in the same period.

At the current price of $407.18, HD trades 7.3% below its 52-week high mark of $439.37, reflecting an upside potential.

HD’s 1-Year 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 25.81X, exceeding the industry average of 22.42X and the S&P 500’s average of 22.86X.

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.

Image Source: Zacks Investment Research

Investment Thesis

Home Depot has maintained strong revenue growth and profitability, supported by its leadership in the home improvement sector and effective execution of the “One Home Depot” strategy. Strategic investments in digital capabilities, supply-chain efficiency, and in-store technology have enhanced its ability to serve both DIY customers and professional contractors.

The company’s interconnected model, seamlessly integrating physical stores with a robust online platform, continues to improve customer experience and boost digital engagement. Expansion of the Pro ecosystem, including the acquisition of SRS Distribution, further strengthens its position in building materials and enhances service for trade professionals.

While the long-term growth prospects remain compelling, near-term challenges such as softer demand for big-ticket items and broader macroeconomic pressures may limit immediate upside. Nonetheless, Home Depot’s strong market position, operational efficiency and strategic initiatives leave it well-placed to capture growth opportunities over the long run.

Conclusion

As Home Depot approaches its second-quarter fiscal 2025 earnings release, investors are closely watching whether the company can deliver on expectations. Its strong market position, strategic initiatives under the “One Home Depot” plan, and steady growth in Pro customers remain encouraging, but potential risks cannot be overlooked. Balancing these strengths against near-term uncertainties will help investors make a more informed decision.

While the long-term outlook is compelling, a patient approach may be prudent, with greater clarity likely emerging post-earnings. For current shareholders, maintaining positions appears reasonable, as the results should reinforce Home Depot’s operational resilience and strategic execution. In a retail environment, shaped by evolving consumer trends and macroeconomic headwinds, the company’s consistent performance, ongoing digital transformation and expanding Pro ecosystem remain key drivers of its investment case, making it a stock to watch closely in the quarters ahead.