Home Depot Earnings: Despite Mounting Consumer Pressures, Demand Hangs Tight

Key Morningstar Metrics for Home Depot

• Fair Value Estimate
  : $335.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Wide
• Morningstar Uncertainty Rating
  : Medium

What We Thought of Home Depot’s Earnings

Home Depot’s HD first-quarter results included same-store sales growth of 0.6% and an adjusted operating margin of 12.3%. The firm’s 2026 outlook is unchanged, calling for same-store sales growth of flat to 2.0%, an adjusted operating margin of 12.8%-13.0%, and adjusted EPS growth of flat to 4.0%.

Why it matters: Consumers are feeling the pinch of inflation and higher interest rates, so transactions have declined over the past year. Customers are currently focused on need-based rather than discretionary projects, but large-ticket transactions should return when the macro environment stabilizes.

• Still, Home Depot is taking share, as evidenced by 4.8% sales growth, which eclipsed average industry growth of 4.0% in the quarter. SRS was likely a key contributor to this, as professional sales outpaced do-it-yourself and are on track to deliver mid-single-digit organic growth in 2026.
• Moreover, we think recent acquisitions under the SRS umbrella help mute demand cyclicality by focusing on repair, replace, and remodel efforts versus new construction, which tends to be swayed by financing costs. The last time the 10-year yield was above current levels was early 2025.

The bottom line: We don’t plan any material change to our $335 fair value estimate per share for wide-moat Home Depot. We see the firm investing to elevate its brand intangible asset by focusing on improving loyalty, customer satisfaction, delivery speed, and lower friction.

• Shares trade at 10% discount, a bargain not broached since 2020, and we are becoming more constructive on ownership after a 12% year-to-date decline. We think investors remain concerned that same-store sales could stay flat over the rest of the year, thereby constraining profits.

We see long term-sales growth of around 4.5% on low-single-digit same-store sales and expansion of the pro distribution channel, which could also uplift cross-selling opportunities. Still, investments to support such growth are likely to keep operating margins under 15%.