Ahead of Earnings, Is The Home Depot Stock a Buy, a Sell, or Fairly Valued?

The Home Depot is set to release its fiscal first-quarter 2026 earnings report on May 19. Here’s Morningstar’s take on what to look for in The Home Depot’s earnings and the outlook for its stock.

Key Morningstar Metrics for The Home Depot Stock

• Fair Value Estimate
  : $335
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

The Home Depot Earnings Release Date

• Tuesday, May 19, 2026, before start of trading

What to Watch for in The Home Depot’s Q1 Earnings

• We will be watching how macroeconomic factors are affecting The Home Depot—specifically, how the stagnating housing market is affecting sales, whether affordability has further crimped turnover amid rising inflation, and to what extent geopolitical uncertainty has had a distinct impact on demand.
• We also expect comments on whether large projects are still languishing and if customers remain mostly willing to undertake lower-priced projects.
• We are interested in how smoothly The Home Depot has integrated acquired businesses, especially its most recent acquisition, HVAC distributor Mingledorff’s. We will listen to learn if there are other opportunities in adjacent distribution categories that might be attractive.
• The Home Depot is currently trading at a 7% discount to our $335 fair value estimate. It has traded at a premium above our fair value since 2022 and hasn’t been undervalued since March 2020.

Fair Value Estimate for The Home Depot Stock

We are raising our fair value estimate for The Home Depot to $335 from $325 per share, after incorporating modestly better-than-expected fourth-quarter results and largely maintaining our 2026 outlook. With its 3-star rating, we believe The Home Depot’s stock is fairly valued. Fourth-quarter same-store sales of 0.4% were ahead of our forecast 0.5% contraction, and the adjusted operating margin of 10.5% was 30 basis points better than we expected. This upside as well as time value accounted for the fair value change. The firm reiterated its 2026 forecast, which included 2.5%-4.5% sales growth, an adjusted operating margin of 12.8%-13%, and EPS growth of flat to 4%. Our updated forecast includes sales and EPS growth of 3.6% in fiscal 2026 along with a 12.9% adjusted operating margin (down 10 basis points).

Read more about The Home Depot’s fair value estimate.

Economic Moat Rating

We assign The Home Depot a Morningstar Economic Moat Rating of wide. As the largest global home improvement retailer, Home Depot possesses a competitive edge owing to its brand intangible asset and cost advantage, in our view. Over the past 10 years, Home Depot’s sales growth has outpaced the building materials and garden equipment and supplies dealer industry’s average growth of 4.3% by 230 basis points annually (based on the US Census Bureau data), an indication of the brand’s ongoing relevance. We expect Home Depot’s strong brand equity and extensive scale should enable incremental market share gains in a highly fragmented $1.1 trillion North American home improvement market, on top of the roughly 15% market share it has amassed thus far (given roughly $155 billion in sales in 2025).

We are confident that Home Depot’s competitive position will continue to benefit the business, indicated by our forward return on invested capital metrics remaining north of our 7% weighted average cost of capital over the next two decades (with ROICs including goodwill forecast to ultimately reach 21.5% in 2035 by our calculation), underpinning our wide moat rating.

Read more about The Home Depot’s economic moat.

Financial Strength

Home Depot has had no concerns tapping the credit markets to finance the business in recent years. At the end of 2025, Home Depot held debt of nearly $56 billion. As a result of higher leverage from the SRS acquisition, management has halted share repurchases; however, we model share repurchases to resume at the end of 2026, as Home Depot works its leverage metrics back toward 2 times after digesting the GMS transaction in 2025. Including the impact of recent acquisitions, EBIT is forecast to cover the net interest expense 9 times at the end of 2026.

Free cash flow to the firm has averaged about 5% of sales over the past three years, supporting higher leverage, and we expect the company will stay within its targeted adjusted debt/EBITDAR metric of 2 times over the long term. The balance sheet’s $28 billion in net property, plant, and equipment provides an asset base to secure debt if necessary. Given Home Depot’s ability to generate tremendous free cash flow to the firm (we forecast an average of $20 billion in 2026-35), we expect management will have no problem facilitating dividend payments and remaining at or above its long-term dividend payout ratio target of 55%.

Read more about The Home Depot’s financial strength.

Risk and Uncertainty

We give the company a Medium Morningstar Uncertainty Rating owing to its strong brand recognition, which has helped stabilize sales through the cycle. We believe the most significant near-term risks are a continuation of slow turnover in the real estate market and potential tariff impacts. Low home inventories for sale remain problematic, aggravated by higher-than-optimal mortgage rates (a 30-year loan remained near 6.0% at the end of February 2026). Although new competitors could set up shop on Home Depot’s turf, we think new players would be hard-pressed to offer similarly competitive product prices, as they likely wouldn’t have vendor relationships of the same magnitude.

In our opinion, Home Depot has minimal environmental, social, and governance risk. Product sourcing, potential data theft, and consumers’ shift in preferences to sustainable product offerings are relevant, but Home Depot should be able to adapt, and we do not see any material financial impact from these factors.

Read more about The Home Depot’s risk and uncertainty.

HD Bulls Say

• Home Depot’s continued investments in supply chain and merchandising should improve productivity and support its leadership position in the home improvement market.
• The firm has returned $71 billion to its shareholders through dividends and share buybacks over the past five years, nearly 20% of its market cap. We forecast Home Depot will return more than $70 billion to owners over the next five years.
• The large professional market is $300 billion. As Interline and HD Supply make up a low-double-digit share, SRS reaches these specialists, and GMS joins the mix, share is up for grabs.

HD Bears Say

• Weak consumer spending, higher interest rates, or an economic downturn could hinder sales for home improvement projects and affect Home Depot’s growth.
• Productivity improvement gains could prove more challenging to achieve, as simpler efforts have already borne fruit. New initiatives could face some implementation risks, creating inconsistent profitability.
• As Home Depot digests more than one sizable acquisition, integration risk remains, and management could be distracted by idiosyncratic issues at larger tie-ups like SRS or GMS.

This article was compiled by Jillian Moore.