Home Depot Turns a Corner: New Highs Likely This Year

Key Points

• Home Depot's mixed results for Q4 and guidance for 2025 are enough to keep the market supported; new highs likely this year.
• The company turned a corner with comp store growth back in the picture.
• Cash flow and capital returns remain solid and underpin substantial gains in shareholder value. 

Home Depot’s NYSE: HD Q4 2024 report and guidance for 2025 have plenty to be unhappy about, but the simple truth is that this company turned a corner in 2024. It is on track for its stock to hit new highs that could come before the middle of the year.

At face value, current conditions offset the warning housing markets may not improve. Those include a reversion to growth, better-than-expected earnings, and sustained capital returns supported by strength in the home improvement market.

New home sales are sluggish, and big-ticket items still lag, but strength in smaller DIY projects is present and likely to continue this year. 

Home Depot Ends 2024 With Momentum: Issues Cautious Guidance for 2025

Home Depot had a solid Q4 with results impacted by an extra week, and both the reported and adjusted figures were above consensus forecasts. The company reported $39.7 billion in net revenue for a gain of 14.1% year-over-year, which exceeded MarketBeat’s reported consensus by 160 basis points—the extra week added $2.5 billion to the top-line, aided by a 0.8% increase in comp sales. 

Comp sales growth is important because this is the first quarter in two years to show positive comps, and tickets and ticket averages drove the comp. Transactions are up 7.6%, the first positive reading in 11 quarters, while the ticket average is up 0.3% for the first positive reading in 6 quarters. 

The margin news is also good. The company experienced some margin pressure but was able to mitigate it to a degree. The net result is high single-digit net earnings and low double-digit adjusted EPS growth compared to the mid-teen revenue growth pace. The adjusted EPS rose by nearly 11% to outpace consensus by almost 300 basis points, underpinning an already solid capital return outlook. 

The guidance is mixed but ultimately favors higher share prices. The company forecasted a 2.8% revenue growth, including a 1% comp store increase and 13 new locations, slightly below the analysts’ consensus, offset by margin strength. The company forecast adjusted EPS to contract by 2% compared to the 4% consensus target, which is likely a cautious estimate. The company is heading into its busiest seasons, with consumer tailwinds beginning to blow. 

Home Depot Raises Dividend for 2025

Home Depot’s 2025 dividend increase isn’t robust, but it is still a sign of the company’s financial health that helps to boost shareholder value. The 2.2% increase is sustainable and allows for effective investment and opportunistic acquisitions, which are boosting shareholder value.

At the end of F2024, the balance sheet highlights include reduced cash offset by increased receivables, inventories, goodwill, and intangibles. Liabilities, including long-term debt, are also up but far less than assets, leaving equity up significantly. Home Depot’s equity surged more than 550%, leaving shareholders in a good position and the company with ample flexibility. 

The initial analyst response to the 2025 guidance and dividend increase is bullish. The first revision tracked by MarketBeat was from D.A. Davidson, which raised its price target to $500. The $500 target is well above the $443 consensus, which would be a new all-time high if reached. D.A. Davidson’s target is now the highest issued by major analysts and offers more than 25% upside from critical support levels. 

Home Depot Confirms Support at a Critical Level

Home Depot confirmed support at a critical level following the 2025 guidance. The critical support is at multimonth lows and the neckline of a potential Head & Shoulders Reversal. The takeaway for investors is that HD stock is unlikely to correct to lower levels and will likely trend sideways as its market regains traction. A move above the $415 level will be significant and could increase buying activity.