Home Depot (HD) Stock Drops to 2-Year Low After Earnings — Time to Buy?

TLDR

• Home Depot Q1 revenue rose 4.8% to $41.77 billion, beating estimates, but EPS of $3.43 was down from $3.56 a year ago
• The stock briefly fell below $290, hitting its lowest level since late 2023, pushing the dividend yield above 3%
• Comparable sales grew just 0.6% overall, with U.S. comp sales up only 0.4%
• Management reaffirmed full-year guidance of 2.5%–4.5% sales growth, but did not raise it
• Analysts hold a consensus “Moderate Buy” rating with an average price target of $392.45

Home Depot beat Wall Street’s top and bottom line estimates in Q1, but the stock still hit a two-year low. The quarter was decent — it just wasn’t enough to move the needle on the bigger picture.

The Home Depot, Inc., HD

The stock briefly dipped below $290 on Tuesday following the results, a level not seen since late 2023. HD has since recovered slightly, trading around $302, still well off its 52-week high of $426.75.

Revenue for Q1 fiscal 2026 came in at $41.77 billion, up 4.8% year over year and ahead of the $41.59 billion consensus estimate. EPS of $3.43 beat the $3.41 estimate, though it was down from $3.56 in the same quarter last year.

Comparable sales — the cleaner number — told a more cautious story. Overall comp sales rose just 0.6%, with U.S. comp sales up 0.4%. Fewer customers came through the door, with comparable transactions down 1.3%, though those who did show up spent a bit more. The average ticket rose 2.3% to $92.76.

Guidance Held Steady

Home Depot reaffirmed its full-year fiscal 2026 guidance. Total sales growth is still expected in the range of 2.5% to 4.5%, with adjusted EPS flat to up 4%. Analysts are forecasting full-year EPS of $15.02.

CFO Richard McPhail acknowledged that consumers are feeling pressure from high gas prices and affordability concerns. The housing market remains a drag — mortgage rates have stayed elevated, keeping home turnover near multi-decade lows, which tends to delay the bigger renovation projects that drive HD’s best growth quarters.

Return on invested capital slipped to 25.4% from 31.3% a year ago, partly weighed down by debt from recent acquisitions.

Building the Pro Business

Home Depot has been using the slowdown to expand its Professional contractor segment. The $18.25 billion acquisition of SRS Distribution in 2024 opened a large new addressable market. The company later added building products distributor GMS, and earlier this month SRS closed on Mingledorff’s, an HVAC distributor with 42 locations across the southeastern U.S.

Management estimates these moves bring Home Depot’s total addressable market to roughly $1.2 trillion, with HVAC distribution adding around $100 billion of that.

On the dividend front, HD raised its quarterly payout 1.3% in February to $2.33 per share, putting the annualized yield at around 3.1% at current prices — above its 10-year average of roughly 2.4%. The company has now paid a dividend for 156 consecutive quarters.

Institutional interest remains steady. IFP Advisors increased its HD position by 16.1% in Q4, adding 4,369 shares. Several analysts trimmed price targets after the report, though the consensus remains “Moderate Buy” with an average target of $392.45.

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