Home Depot Stock Rises Despite Earnings Miss and Housing Market Chill
Explore how Home Depot’s mixed Q1 earnings and housing market challenges shape its stock performance, tariffs impact, and what investors should watch in this evolving retail landscape.
Key Takeaways
- Home Depot’s Q1 revenue beat expectations despite earnings per share missing estimates.
- Same-store sales fell slightly overall but showed a small gain in the U.S.
- Housing market softness and high mortgage rates are cooling big renovation projects.
- Tariff uncertainty persists, but Home Depot plans to avoid price hikes by diversifying suppliers.
- Investors see the results as better than feared, pushing the stock higher premarket.
Home Depot’s recent earnings report marks the end of a remarkable five-year streak of beating Wall Street’s earnings forecasts. While the home improvement giant missed adjusted earnings per share estimates for the first time since May 2020, its revenue climbed a solid 9.4% to nearly $40 billion, surpassing analyst expectations. This mixed bag reflects deeper currents in the housing market, where soaring mortgage rates near 7% and $400,000 median home prices are cooling buyer enthusiasm and, by extension, big-ticket home renovations. Meanwhile, tariffs introduced under the Trump administration continue to cast a shadow, though Home Depot is navigating these challenges without passing costs onto customers. Investors, perhaps relieved by the less-bad-than-expected results and the company’s steady guidance, pushed the stock up in premarket trading. Let’s unpack what this means for Home Depot, its investors, and the broader retail landscape tied to housing trends.
Navigating Earnings Miss
Home Depot’s five-year streak of beating earnings estimates came to an end in Q1 2025, with adjusted earnings per share of $3.56 falling just short of the $3.60 consensus. That’s a subtle but notable shift for a company that hadn’t missed since May 2020. Yet, the stock climbed 2.1% in premarket trading, signaling that investors were more focused on the bigger picture. Revenue rose 9.4% year-over-year to $39.9 billion, beating expectations and showing that sales momentum remains. CFO Richard McPhail’s assurance that tariffs won’t lead to price hikes likely helped soothe investor nerves. This mix of a slight earnings miss but strong revenue and steady guidance reveals a company balancing headwinds without losing its footing. It’s a reminder that earnings misses don’t always spell doom—sometimes they’re just part of a bigger, more complex story.
Housing Market’s Chill Impact
The housing market’s frosty reception is clearly reflected in Home Depot’s sales mix. While total sales rose, comparable-store sales dipped 0.3%, with only a modest 0.2% increase in U.S. stores. Inflation running above 3% during the same period means real spending power is shrinking, and consumers are pulling back. CEO Ted Decker’s nod to “smaller projects” and spring events hints at a shift away from big renovations toward DIY touch-ups like mulch and paint. The culprit? Mortgage rates hovering near 7% and median home prices around $400,000 are cooling homebuying and, by extension, demand for major home upgrades. When home sales stall, so do the big-ticket projects that fuel Home Depot’s growth. This dynamic underscores how deeply retail tied to housing depends on broader economic factors, reminding investors that even retail giants aren’t immune to market cycles.
Tariffs and Pricing Strategy
Tariffs remain a thorny issue for retailers, and Home Depot is no exception. The Trump administration’s tariffs on imports have pushed costs higher across the sector, with Walmart warning of price hikes to offset these expenses. Yet Home Depot is charting a different course. CFO McPhail confirmed the company does not plan to raise prices due to tariffs, opting instead to work closely with suppliers and diversify sourcing. A spokesperson noted that no single country outside the U.S. will represent more than 10% of purchases within a year, a strategic move to reduce tariff exposure. This approach contrasts with competitors like Lowe’s, which has higher exposure to Chinese goods and a larger DIY customer base. Home Depot’s Pro business, making up half its customer base, offers some buffer, as professional buyers may be less price-sensitive. This tariff navigation strategy may be a key factor in the stock’s resilience despite earnings pressures.
Investor Sentiment and Stock Movement
Despite the earnings miss and housing market headwinds, Home Depot’s stock rose about 2% in premarket trading following the Q1 report. This reaction suggests investors were bracing for worse and found relief in the company’s revenue beat and steady full-year guidance. The stock’s year-to-date decline of 2.5% contrasts with the S&P 500’s 1.4% gain, reflecting sector-specific challenges. Analysts like Mizuho’s David Bellinger highlighted the “slightly positive” U.S. same-store sales and improving trends through the quarter. TD Cowen’s Max Rakhlenko noted that Home Depot is “better positioned to manage tariffs” and praised the company’s Pro segment. The market seems to be rewarding resilience and strategic positioning over perfection. For investors, this underscores the value of looking beyond headline earnings misses to the underlying business health and adaptability.
Outlook Amid Economic Uncertainty
Looking ahead, Home Depot reaffirmed its full-year guidance, expecting net sales growth of approximately 2.8% and a slight adjusted earnings decline of about 2%. Comparable-store sales are forecasted to grow around 1%. However, the housing market remains a wild card. With mortgage affordability worsening and homebuilder confidence at an 18-month low, the demand for major renovations may stay subdued. Higher Treasury yields following the U.S. credit rating downgrade could increase financing costs, adding pressure on consumers. Industry experts predict it will take multiple quarters into next year before growth solidifies. Yet, Home Depot’s strong execution, digital capabilities, and focus on its Pro customer base offer a foundation for long-term success. The company’s ability to pivot amid tariffs and market softness will be critical as it navigates these choppy waters.
Long Story Short
Home Depot’s Q1 results paint a nuanced picture: revenue growth and steady guidance offer a silver lining, yet the dip in same-store sales and the housing market’s chill signal caution. The company’s focus on smaller projects and its Pro customer base provide some insulation against broader economic headwinds. Tariff pressures remain a wild card, but Home Depot’s strategy to diversify sourcing rather than raise prices shows savvy navigation. For investors, the stock’s modest rise suggests confidence in Home Depot’s resilience, though the housing market’s trajectory will be a key factor to watch. As mortgage rates stay elevated and home sales soften, the era of big renovations may pause, nudging consumers toward smaller fixes. In this evolving landscape, Home Depot’s ability to adapt and engage customers across project sizes will determine if this earnings miss is a mere blip or a reset. For now, the story is one of cautious optimism amid uncertainty—a reminder that even retail giants must weather storms with steady hands.