Investors Look to Home Depot’s 2024 Forecast for Signs of Recovery

Home Depot Stock

When Home Depot (NYSE:HD) reports its fourth-quarter results on Tuesday, investors will be closely scrutinizing its annual forecast for 2024, hoping for indications of a rebound in demand after a challenging year.

Sarah Henry, managing director and portfolio manager at Logan Capital Management, notes that 2023 was widely anticipated to be a transition year for the home improvement sector. Investors are now focused on 2024 and 2025, expecting a return to a more normalized environment for home improvement projects.

Home Depot and its competitor Lowe’s (NYSE:LOW) are expected to close out 2023 with their fifth consecutive decline in quarterly same-store sales, reflecting tighter budgets and a shift in consumer spending habits toward services. However, analysts anticipate a shift as mortgage rates stabilize and the housing market begins to show signs of stabilization.

Wall Street analysts are growing more bullish on a resurgence in the home improvement sector, especially in the latter part of 2024. Key factors fueling this optimism encompass anticipated enhancements in discretionary spending alongside home sales.

Although promotions during holiday shopping events like Black Friday may have temporarily boosted sales in the fourth quarter, weaker sales reports are expected as companies navigate a year of adjustment following the exceptional growth experienced during the pandemic.

Looking ahead to 2024, Home Depot is expected to forecast roughly flat comparable sales, an improvement from the estimated 3.2% decline in 2023. Similarly, Lowe’s is likely to forecast a 1.1% drop, compared to a projected 4.8% fall in the previous year. Both companies are expected to rebound with positive same-store sales figures in the latter half of 2024.

Analysts at Bernstein express confidence in improving macroeconomic trends by the second half of the year.

Key Expectations

  • Home Depot is expected to report a 3.3% drop in fourth-quarter same-store sales, with a per-share profit of $2.77.
  • Lowe’s is expected to report a decline of about 7.1% in same-store sales, with projected earnings per share of $1.68.

Wall Street Sentiment

  • Home Depot shares have risen approximately 4% year-to-date, while Lowe’s has gained 2.6%, both trailing the benchmark S&P 500 index.
  • Home Depot is rated “buy” among 36 brokerages covering the stock, with at least six brokerages raising their price targets on the stock in the past month.
  • Lowe’s has an average “buy” rating with a median price target of $235.

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