By Sabrina Escobar and Elsa Ohlen

Home Depot stock rose Tuesday even after the home improvement retailer missed on earnings for the first time in five years. However, the company beat revenue estimates.

Shares rose 2.5% to $388.75 in premarket trading, suggesting that investors were perhaps relieved the retailer's earnings weren't any worse. The sales beat comes against the backdrop of an uncertain macroeconomic environment fueled by tariffs.

Adjusted earnings per share for the April quarter came in at $3.56 on revenue of $39.9 billion. Analysts surveyed by FactSet had expected adjusted EPS of $3.60 on revenue of $39.3 billion.

Prior to Tuesday's earnings, Home Depot had beaten earnings expectations for 19 consecutive quarters, according to FactSet data. During that period it beat expectations by 4.8% on average. The retailer hasn't missed on sales since the first fiscal quarter in 2024.

Same-store sales were worse than expected, declining 0.3% compared to the same period last year. Analysts had predicted they would decline 0.1%.

First-quarter sales were unfavorably impacted by unseasonal weather and deteriorating consumer confidence, Jefferies analysts led by Jonathan Matuszewski said in a research note.

U.S. same-store sales rose 0.2%. The company also reaffirmed its full year 2025 guidance which it issued in February.

It continues to expect sales growth of 2.8% and same-store sales growth of 1% for the current fiscal year.

This is breaking news. Read a preview of Home Depot below and check back for more analysis soon.

Investors hoping for a home improvement renaissance this year could find themselves disappointed when Home Depot reports financial results Tuesday morning.

Wall Street is forecasting a muted report from both Home Depot and rival Lowe's this earnings season, reflecting softer demand trends for home renovation equipment.

"Going into home improvement earnings next week, we expect a relatively weak Q1 for both LOW and HD given unfavorable weather, weak consumer sentiment, and mixed performance from peers and suppliers," wrote Zhihan Ma, an analyst at Bernstein. She rates Home Depot Market Perform and Lowe's Outperform.

Home Depot had 3.8% fewer store visits throughout the quarter than the same period a year ago, according to data from Placer.ai. Lowe's visits fell as well, down 3.6%.

The housing market plays a big role in home improvement demand. People tend to renovate homes just before selling a home, or right after buying. And so far, Americans haven't been doing much of either. March existing-home sales were the slowest since 2009, coming off the heels of several months of lackluster sales trends. High mortgage rates and home prices have kept many potential buyers on the sidelines, and even warmer spring weather has done little to reboot demand.

Analyst have been trimming their earnings expectations for the sector to reflect the likelihood of a softer quarter. The Street now expects Home Depot will post adjusted earnings of $3.60 a share, according to FactSet consensus estimates. Ahead of Home Depot's February earnings report, analysts had penciled in earnings of $3.69 a share.

Revenue projections are calling for $39.3 billion, while same-store sales, which measure sales growth at stores open for more than a year, are expected to decline by 0.1%.

Citi analyst Steven Zaccone believes both Home Depot and Lowe's could slightly fall short of Wall Street's same-store sales expectations given unfavorable spring weather and ongoing macroeconomic uncertainty. He lowered his earnings estimates for the quarter last week, but maintained a Buy rating for Home Depot and $433 price target.

Evercore ISI's Greg Melich is more upbeat. He added Home Depot to the firm's tactical outperform list Monday. He argues that with shares down 2.5% year to date, the market has already factored in a soft report, and that the shares could rally if management reiterates guidance and indicates that sales are improving.

"As long as better trends into spring are confirmed, we believe the market reaction could prove similar to Walmart albeit with a bit more kick...a meet and keep with better trends is enough to move it back to $400+ levels last seen in January," Melich wrote. He rates Home Depot shares Outperform with a $400 price target.

Home Depot stock closed 0.4% lower at $379.38. Monday.

Commentary about tariffs could also sway the stock, but it may not be the defining factor.

Many investors believe the home improvement sector is generally better insulated to shifts in trade policy than other retailers. Zaccone estimates that Home Depot sources about 65% of its goods from the U.S., 13% from China, and 13% from Mexico.

"Given HD's significant scale (and thus, negotiating power) coupled with its smaller China exposure relative to our coverage average, we view HD as relatively well-positioned to navigate the current tariff backdrop," Zaccone wrote.

Write to Sabrina Escobar at sabrina.escobar@barrons.com

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May 20, 2025 07:15 ET (11:15 GMT)

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