Home Depot (HD) PT Raised to $398 at Bernstein SocGen Group

Bernstein SocGen Group analyst Zhihan Ma raised the price target on Home Depot (NYSE: HD) to $398.00 (from $380.00) while maintaining a Market Perform rating.

The analyst comments "HD saw comp sales turning negative (-0.3%) in Q1 on the back of inconsistent weather and continued weakness in big ticket projects. Ticket was essentially flat, and comp transactions decreased -50bps. FX was also a 70bps headwind to comp sales growth. Adj. EBIT margin of 13.2% came in 20bps below consensus and adj. EPS of $3.56 was a 3c miss. HD maintained FY25 guidance, which we previously viewed as conservative. HD only baked in the organic sales growth of SRS in 2H, without accounting for the sales lift from bolt on acquisitions that SRS continues to make. However, a lack of sizing of pricing and tariff impacts leaves us cautious. Management targets <10% exposure to any given country in 12 months, but risk remains in the interim. Given HD’s ~50% overall import exposure, the company will likely need to absorb and/or pass on some tariff-related cost increases, after working with suppliers to reduce costs and re-spec products. The company continues to expect comp sales growth of 1.0% (vs. consensus of 1.2%), net sales growth of 2.8% (vs. consensus of 2.9%), gross margin of 33.4% (vs. consensus 33.4%), adj. EBIT margin to be 13.4% (vs. consensus 13.4%) and adj. EPS of $14.94 (vs. consensus of $15.00). Given the recent de-escalation in tariff tensions, we see more moderate tariff risks but continue to expect muted home improvement demand with mortgage rates elevated at close to 7% and consumer spending power constrained. While HD should benefit from incorporating SRS into comp in 2H25, the elasticity impact from tariff-led price increases could weigh on traffic. Given these near term uncertainties and a lack of clear catalysts, we don’t expect HD’s comp sales growth to return to the 3%+ range until FY27."

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