Home Depot is set to release its Q1 2025 earnings on May 20, 2025, and expectations are running high. While revenue growth appears solid, thanks to strategic moves like the SRS Distribution acquisition, investors should brace for some earnings pressure. Here’s what you need to know ahead of the report.
Revenue Growth Expected to Impress
Wall Street is projecting Q1 revenue between $39.16 billion and $39.33 billion, up around 7.6% to 8% year-over-year. That’s a solid increase from the $36.42 billion posted in Q1 last year.
A major driver behind this top-line growth is the acquisition of SRS Distribution, which strengthens Home Depot’s footprint in the professional (Pro) segment – a key focus area in their growth strategy.
EPS Dip Despite Strong Sales
Even with higher revenue, analysts expect earnings per share (EPS) to decline slightly, forecasting between $3.56 and $3.60, compared to $3.63 in Q1 2024.
This small drop, about 1% to 1.1%, highlights ongoing margin pressures, likely from higher costs and economic headwinds. Rising operating expenses and cost of goods could be chipping away at profits even as sales grow.
Mixed Expectations for Comparable Sales
When it comes to comparable sales, estimates are all over the place. Forecasts range from a 0.5% decline to a 3.8% increase, reflecting uncertainty in core demand, particularly on the DIY side of the business.
Some analysts predict a modest uptick in customer traffic (about 2.1%), along with a slight boost in average ticket size (around 1.4%). But overall, the outlook remains cautious.
Housing Market & Rates Still a Drag on DIY
The broader macroeconomic environment continues to be a challenge. High mortgage rates and slower housing turnover are holding back big-ticket DIY projects like kitchen remodels.
Interest rates are also limiting consumer financing options, which could dampen enthusiasm for larger purchases.
Tariffs Could Pressure Margins
Another concern is the potential impact of tariff-related cost increases. With many of Home Depot’s imports coming from regions like China, Mexico, and Canada, rising tariffs could inflate costs and squeeze margins—especially if the company chooses not to pass those increases onto consumers.
While Home Depot’s size gives it some pricing power, this is a key area to watch in the earnings call.
The Pro Segment Is Carrying the Load
Unlike the DIY market, the Pro segment continues to show strength. The SRS Distribution acquisition is expected to deliver mid-single-digit organic growth in fiscal 2025 and significantly bolster Home Depot’s reach with professional customers.
This focus on the Pro side is paying off and may help offset DIY softness in the short term.
2025 Full-Year Outlook: Steady but Conservative
Home Depot’s guidance for fiscal 2025 remains relatively conservative. The company expects:
- Total sales growth around 2.8%
- Comparable sales growth near 1.0%
- 13 new store openings
- Gross margin of about 33.4%
- Operating margin (GAAP) around 13.0%
- A projected EPS decline of ~3% (GAAP) and ~2% (adjusted)
Most analysts believe this guidance will be reaffirmed on the Q1 earnings call, suggesting that Q1 results are largely tracking expectations. But any revision—especially downward—could rattle investors.
Strategic Initiatives Remain a Long-Term Play
Home Depot continues to lean into its “One Home Depot” strategy, which focuses on enhancing supply chain efficiency, boosting digital capabilities, and streamlining the customer experience.
These investments are meant to keep the company competitive across channels – online and in-store – and across customer types, from weekend DIYers to full-time contractors.
Analyst Ratings Stay Bullish (With a Dash of Caution)
Analysts remain mostly bullish on Home Depot. The average price target sits between $423 and $436, suggesting 12% to 15% upside from recent levels around $378.
However, some firms like Morgan Stanley and JPMorgan have trimmed targets slightly, citing concerns over tariffs and housing market volatility. Still, the majority maintain “Buy” or “Overweight” ratings, reflecting confidence in the company’s long-term fundamentals.
Lowe’s Comparison: Home Depot Has the Edge
Compared to rival Lowe’s, Home Depot is expected to outperform in Q1. Analysts project revenue growth for Home Depot, while Lowe’s may see a decline. EPS is expected to dip for both, but sentiment remains more positive around Home Depot’s execution and strategic positioning.
Final Thoughts: What to Watch on May 20
Home Depot’s Q1 2025 earnings call will offer critical insight into how the company is navigating today’s economic challenges. Key areas for investors to watch include:
- Trends in DIY vs. Pro customer segments
- Commentary on tariff impacts and cost management
- Updates to fiscal 2025 guidance
- Performance of SRS Distribution integration
- Any signs of margin pressure worsening
With macro headwinds still in play, don’t be surprised by volatility in the stock price following the report. But for long-term investors, Home Depot’s solid fundamentals and strategic focus make it a name worth watching closely.