Home Depot entered its latest earnings report with the housing market still under pressure, but Bank of America sees enough strength inside the business to stay bullish on the stock.
Bank of America analyst Christopher Nardone reiterated a Buy rating on Home Depot (HD) and lowered the firm’s price objective to $407 from $412, in a note given to TheStreet. The new target represents about 19.8% upside from the $339.69 share price cited in the report.
The small reduction reflects lower longer-term earnings estimates rather than a change in BofA’s broader thesis. The firm maintained its fiscal 2026 adjusted earnings-per-share estimate at $14.97 while trimming its fiscal 2027 forecast by about 1% to $15.95.
Bank of America sees strength beneath the housing slowdown
Home Depot reported fiscal second-quarter sales of $47.9 billion, up 5.7% from a year ago. Comparable sales increased 1.7%, while U.S. comparable sales rose 1.3%. Adjusted diluted earnings per share climbed to $4.92 from $4.68 a year earlier.
The retailer also reaffirmed its fiscal 2026 outlook, calling for total sales growth of roughly 2.5% to 4.5% and comparable sales growth ranging from flat to 2%. Adjusted diluted EPS is expected to grow between flat and 4% from fiscal 2025.
BofA’s optimism centers on Home Depot’s exposure to professional customers, which the firm estimates account for roughly half of sales. Nardone said the retailer’s higher Pro exposure should support continued outperformance even as the housing backdrop remains muted.
The quarter gave BofA more evidence for that view. Home Depot said companywide comps improved from 1.2% in May to 1.5% in June and 2.3% in July. Management also said Pro customers posted positive comps and outperformed DIY customers during the quarter.
Broad demand was another positive. Home Depot said 13 of its 16 merchandising departments posted positive comparable sales, with strength across categories including electrical, hardware, plumbing, paint and building materials.
Tariff refunds add a wrinkle to Home Depot’s outlook
BofA also flagged a less straightforward part of the quarter: tariff refunds boosted second-quarter profitability, while rising input costs remain a concern for the back half of the year.
Home Depot received $730 million in IEEPA tariff refunds during the quarter. Of that amount, $685 million reduced cost of goods sold, providing roughly a 145-basis-point benefit to gross margin.
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That helped offset about 60 basis points of higher costs tied to fuel, energy and other product inputs, according to Home Depot. Acquisition mix from GMS and Mingledorff’s created another roughly 60-basis-point headwind.
Management expects those higher costs to fully offset the tariff-refund benefit over the full year. Home Depot still reaffirmed its annual guidance, but BofA said the shift puts more focus on second-half cost pressure as the refund benefit fades.
Home Depot’s delivery push could support more share gains
BofA also pointed to Home Depot’s expanding delivery capabilities as another reason the company can keep taking market share.
Home Depot recently rolled out nationwide Express Delivery, which uses more than 2,000 U.S. stores as fulfillment hubs and can deliver thousands of products in three hours or less for a flat fee. The retailer also offers free same-day delivery on orders of $25 or more placed by 4 p.m.
The company expanded next-day delivery for key major appliances to about 60% of the U.S. population, a move BofA believes should help Home Depot compete for more time-sensitive purchases. Home Depot said it is already seeing a sales lift in markets where the faster appliance service is available.
Despite lowering its target, BofA still values Home Depot at 25.5 times its fiscal 2027 earnings estimate, above the firm’s cited long-term average. Nardone argues that premium remains justified by the retailer’s execution, resilience and ability to keep gaining share.
For investors, the near-term housing environment remains a drag. BofA’s call suggests Home Depot may not need a major housing recovery to keep putting distance between itself and weaker competitors.
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