November 28, 2022
House Depot, Lowe’s to see greater gross sales as homeowners transform amid rising charges

Nov 14 (Reuters) – House Depot Inc (HD.N) and Lowe’s Cos Inc (LOW.N) are more likely to report rising gross sales within the third quarter as Individuals proceed to spend on dwelling enhancements in distinction to different retailers dealing with declining discretionary spending resulting from surging costs.

Wall Avenue analysts see the biggest U.S. dwelling enchancment chains benefiting as rising rates of interest encourage dwelling homeowners to renovate present properties slightly than transfer on, whereas skilled contractors have a backlog of labor to clear.

“Whereas the prevailing narrative would counsel in any other case, the sky shouldn’t be but falling throughout housing retail,” Wells Fargo analyst Zachary Fadem mentioned in a observe.

THE CONTEXT

House enchancment chains noticed gross sales and income surge throughout the pandemic as Individuals hunkered down at dwelling revamped their residing areas.

Whereas demand is predicted to chill, greater mortgage charges and residential costs are offering a brand new cause for households to transform their present properties.

“House Depot and Lowe’s not have the extra captive client base they’d all through 2020. But customers very a lot proceed to spend on the house,” mentioned MKM Companions analyst David Bellinger.

Paint and coatings maker Sherwin-Williams Co (SHW.N) mentioned final month that skilled contractors nonetheless had backlogs that may take them via the tip of the 12 months and even longer.

“The growing older dwelling continues to require extra reworking, extra updates, individuals growing older in place, and we see that,” Sherwin-Williams Chief Government John Morikis mentioned.

Reuters Graphics Reuters Graphics

THE FUNDAMENTALS

** House Depot is predicted to report Q3 income of $37.96 billion, up greater than 3% from final 12 months, whereas Lowe’s is estimated to indicate an increase of about 1% to $23.13 billion

** Analysts count on House Depot to submit a revenue of $4.12 per share, whereas Lowe’s is predicted to report earnings of $3.10 per share

House enchancment shares

WALL STREET SENTIMENT

** House Depot is rated “purchase” on common amongst 36 brokerages; Lowe’s has a consensus ranking of “purchase” amongst 33 analysts

** The median value goal for House Depot is $345.50, whereas that of Lowe’s is $235

** House Depot shares have shed about 24% YTD, with Lowe’s down over 19%, owing to worries of a requirement slowdown

Reporting by Deborah Sophia in Bengaluru; Modifying by Sriraj Kalluvila

Our Requirements: The Thomson Reuters Belief Rules.