Barclays: Home Depot, Lowe's to Top Q1 Estimates

Barclays Projects Stronger-Than-Expected Q1 for Home Retailers

Barclays analysts forecast that both Home Depot and Lowe’s will report first-quarter results slightly above consensus estimates. The projection anticipates comparable sales growth of around 1% for both companies, which is modestly above the market consensus of approximately 0.5%.

Current Market Situation

Despite continued weakness in the housing sector and prevailing consumer uncertainty, Barclays notes that demand appears stable to slightly improving. This trend is supported by several factors, including the transition into the spring season, the distribution of tax refunds, and easing year-over-year comparisons from previous hurricane impacts. While progress on interest rates and housing has been slower than anticipated, the firm's trackers indicate an improvement in trends from the fourth quarter.

Economic and Stock Impact

The analysis suggests a favorable setup for both stocks, which have lagged in performance. Barclays maintains its Overweight rating on Home Depot and Lowe’s. The firm points out that while the housing market seems to be bouncing along the bottom, it is sufficient to support slightly positive overall demand growth. However, interest rates are considered the key factor for any significant upward movement in the future. It was also noted that home operating costs as a percentage of consumer income are at their highest level since the second quarter of 2014.

Outlook Summary

In conclusion, while macroeconomic pressures persist, a combination of easing comparisons and gradually improving demand is expected to drive positive Q1 results for Home Depot and Lowe's, positioning them to exceed current market expectations.

FAQ

Q: Why does Barclays expect Home Depot and Lowe's to beat estimates?
A: Barclays cites gradually improving demand, the transition to spring, tax refunds, and easing hurricane comparisons as key drivers that are expected to offset the ongoing weakness in the housing market.

Q: What is Barclays' rating on Home Depot and Lowe's stock?
A: Barclays has maintained an Overweight rating on both Home Depot and Lowe’s, indicating a positive outlook on their stock performance.

Source: Investing.com