Loop Capital Raises Home Depot and Lowe’s Amid Stabilizing Demand

Loop Capital has upgraded its ratings for Home Depot and Lowe’s from Hold to Buy, based on recent store visits and discussions with management that suggest a bottoming out of demand in the home improvement sector.

The analysts have adjusted their price target for Home Depot from $360 to $460 and for Lowe’s from $250 to $300, citing an anticipated improvement in the economic climate as the Federal Reserve looks to lower interest rates.

Despite these upgrades, Loop Capital has left its revenue estimates for fiscal 2024 unchanged, mentioning that recent storm damage could impact sales in the upcoming quarter. However, they believe investors should overlook these short-term challenges, forecasting an increase in future demand as repair efforts commence in affected areas.

The firm expressed satisfaction with the swift resolution of the recent port strike, which they viewed as a significant risk. Loop Capital has also increased its estimates for fiscal 2025, inspired by extreme weather patterns and a more lenient interest rate environment. They project that Home Depot’s earnings per share for fiscal 2025 will surpass consensus estimates by 44 cents, while Lowe’s EPS is expected to exceed consensus by six cents.

The analysts noted that “stores look great, and promotions seem normalized,” suggesting improved inventory levels for seasonal items such as Halloween and Christmas products.

While they anticipate single-digit growth in same-store sales for both retailers, they emphasized that Home Depot’s acquisition of SRS provides a stronger growth opportunity than Lowe’s. The firm concluded that Home Depot’s long-term growth is likely to accelerate into the high-single digits, whereas Lowe’s is expected to see growth in the mid-single digits.