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Why is HD stock up? Home Depot rises after earnings beat estimates
Home Depot stock rises after Q2 earnings beat estimates, with strong sales, higher comparable sales, market share gains and a steady 2026 outlook.
Home Depot stock is rising after a strong quarterly earnings report. Home Depot shares climbed about 2.1% in premarket trading after the company reported better-than-expected fiscal second-quarter results. The strong numbers gave investors confidence even as the wider stock market remained under pressure.
Sales beat Wall Street expectations. Home Depot reported $47.86 billion in revenue, compared with the roughly $47.27 billion analysts were expecting, according to LSEG data. Revenue also increased 5.7% from a year earlier. Home Depot also beat earnings estimates. The company reported adjusted earnings of $4.92 per share, above Wall Street's estimate of $4.73 per share.
Home Depot sales beat estimates
Comparable sales were stronger than expected. Home Depot's comparable sales increased 1.7%, beating the 0.9% increase expected by analysts, according to StreetAccount. CFO Richard McPhail said this was the company's strongest comparable-sales growth since the fiscal third quarter of 2022.
Customers are still spending on smaller home repairs. Home Depot said demand from repair-focused customers has remained stronger than feared. The company saw broad engagement across its product categories from both professional customers and do-it-yourself shoppers, McPhail told CNBC.
Home Depot is gaining market share
The company is gaining market share. McPhail said the main story of the quarter was Home Depot gaining share among both professional customers and consumers. He said the company's investments are helping it compete and win more business.
Professional customers are an important part of the growth. Home Depot has been trying to attract more professional, or "pro," customers. These customers are generally less affected by some of the wider economic pressures, according to company executives. But customers are still cautious about big projects.
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McPhail said consumers have the money to spend but remain hesitant to take on larger home improvement projects. Customers have told the company they are worried about inflation, fuel costs and wider economic uncertainty, he told CNBC.
Housing market is still a challenge
The housing market remains a major challenge. Home Depot is still dealing with a "frozen housing market," McPhail said. Lower home sales, high mortgage rates and economic uncertainty have caused customers to delay projects linked to buying or selling homes.
Home Depot kept its full-year outlook unchanged. The company reaffirmed its fiscal 2026 guidance instead of raising it. Management expects total sales to grow between 2.5% and 4.5% for the year.
Home Depot keeps its 2026 outlook
The company also expects a stable operating margin. Home Depot expects its fiscal 2026 operating margin to be between 12.4% and 12.6%, according to the company's earnings report. Tariff refunds are helping offset some higher costs. Home Depot said its guidance includes tariff refunds that are expected to partly offset higher fuel, energy and other product input costs. McPhail said the refunds are helping the company maintain value for customers despite those cost pressures.
The company believes its long-term strategy is working. Despite the weak housing market, Home Depot said it plans to continue investing in the business. McPhail said the company believes long-term demand for home improvement remains strong.
Analysts raise Home Depot price targets
Analysts also raised several price targets. Stifel increased its Home Depot price target to $340 from $320, while RBC Capital raised its target to $343 from $340. Bernstein made a smaller cut, lowering its target to $344 from $346. The analyst moves showed that Wall Street remained broadly positive about the quarter.
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The earnings beat is especially important because the broader market is weak. The S&P 500 was down about 0.5% and the Nasdaq was down 1.2%, while the Dow was roughly flat. Middle East tensions and crude oil prices above $90 a barrel were weighing on investor sentiment.
Home Depot is therefore standing out from the wider market. The fact that HD stock is gaining while major indexes are under pressure shows that investors are focusing on the company's strong earnings and sales performance rather than the broader market weakness.
Home Depot CEO remains on medical leave
Home Depot's leadership situation is also being watched. CEO Ted Decker is on a temporary medical leave of absence that began August 12, the company announced last week.
Ann-Marie Campbell is handling day-to-day operations during Decker's absence. Campbell, Home Depot's senior executive vice president of US stores and operations, is overseeing the company's daily operations, according to Home Depot. CFO Richard McPhail is handling financial management and the pro business. McPhail is helping lead the company while Decker is away and also discussed the quarterly results with CNBC.
Lowe's earnings are coming next
Investors are now looking toward rival Lowe's. Lowe's is scheduled to report its own fiscal second-quarter results the following day. Its results could give investors another important look at the health of the US home improvement market.
HD stock is moving up because investors liked the earnings report. The combination of better-than-expected revenue, stronger earnings, higher comparable sales, market-share gains and reaffirmed full-year guidance gave investors confidence. The positive analyst target changes added further support, while the stock's gain stood out because the broader market was falling.
