The outlook for home improvement retailers is shaping up to be a complex landscape, with Wall Street showing clear signs of conflict as major players in the industry prepare to announce their quarterly results. Dow Jones home improvement giant Home Depot (NYSE:HD) is scheduled to report results early Tuesday, followed by rival Lowe’s (NYSE:LOW) on August 22.
In the lead-up to these announcements, pre-earnings chart action reveals contrasting pictures. HD stock is consolidating after a period of growth, while LOW stock is displaying weakness, breaking down below technical support. This comes at a time when homebuilders have been rallying aggressively, boosted by rising interest rates that have cooled sales of existing homes and increased demand and prices for newly built homes.
Such a climate has been favorable for homebuilders like KB Home (KBH), recognized as the IBD Stock Of The Day last week. Conversely, home retailers like Home Depot and Lowe’s face a period of increased uncertainty after years of steady growth fueled by pandemic-driven renovations.
Financial institutions are also divided on the issue. Citi increased its price target on HD stock to $375 from $327 on August 2, maintaining a buy rating on the shares. It foresees home improvement groups aligning with forecasts. Meanwhile, Argus trimmed its target to $350 from $400 at the end of July, anticipating reduced sales as consumers may pull back on home improvement projects. This follows more than two years of intense repair and remodeling activity, though Argus retained its buy rating on HD stock.
Home Depot Earnings
Expectations for Home Depot’s (NYSE:HD) quarterly performance suggest a mixed picture. Analyst consensus points to a drop of 11.9% in earnings to $4.45 per share, alongside a 3.7% decrease in revenue to $42.19 billion. The same reports forecast a 3.9% decline in same-store-sales growth. Shares of HD drifted 0.4% lower to $329.83 early Monday, with the stock trading below the $334.97 buy point for a cup-with-handle base. However, it is up 4% since the beginning of the year.
Lowe’s Earnings
For Lowe’s (NYSE:LOW) August 22 results, analysts are expecting a 4.3% decline in Q2 earnings to $4.47 per share, and a 9.2% fall in revenue to $24.97 billion. Wall Street projects a 2.6% decrease in same-store sales growth. LOW stock appears shaky, breaking below its 10-week moving average after clearing a cup-with-handle buy point at $219.60 in late June. Shares subsequently relinquished an 8% gain before breaking the 10-week support.
These upcoming earnings reports will be a crucial litmus test for the home improvement industry. Amid shifting dynamics in the housing market, mixed signals from analysts, and contrasting stock performance, investors will be keenly watching these results for insights into the industry’s resilience and future direction. The conflicting opinions from Wall Street signify a broader uncertainty that reflects the complex economic factors currently at play, and the sector’s ability to navigate this terrain will be under close scrutiny.
Featured Image: Freepik
Author Kristen Moran 
