Is Home Depot's Focus on Smaller Projects Shaping a New Path for HD's Growth Narrative?

• Earlier this week, Home Depot reported its second quarter 2025 earnings, missing revenue and earnings estimates but reaffirmed its full-year outlook, with quarterly sales reaching US$45.28 billion and net income of US$4.55 billion.
• Customer engagement in smaller home improvement projects saw its strongest levels in two years, driving a significant improvement in same-store sales growth during July, according to management commentary.
• We'll explore how Home Depot's emphasis on resilient demand in smaller projects and maintained annual guidance may impact its investment narrative.

The end of cancer? These 27 emerging AI stocks are developing tech that will allow early identification of life changing diseases like cancer and Alzheimer's.

Home Depot Investment Narrative Recap

To be a shareholder in Home Depot, you need conviction in the resilience of home improvement demand, particularly in smaller projects, and faith that ongoing investments in technology and supply chain efficiency will eventually translate into stronger earnings. The latest earnings miss appears to have little immediate impact on these core drivers, and management’s reaffirmed full-year outlook suggests the most important short-term catalyst, an uptick in smaller project engagement, remains intact. Persistent pressure on adjusted earnings per share, however, is still the most significant risk highlighted by recent guidance.

Among recent announcements, the reaffirmation of Home Depot’s 2025 guidance stands out. While expectations call for modest total sales growth of about 2.8% and a decline in diluted earnings per share, management continues to express confidence in underlying demand for smaller-scale projects, directly relating to the current short-term catalyst and helping offset concerns tied to softer large-scale renovations.

However, despite the positive momentum in smaller projects, investors should keep in mind that cost pressures and flat profit growth remain key risks to...

Read the full narrative on Home Depot (it's free!)

Home Depot's outlook forecasts $180.9 billion in revenue and $17.4 billion in earnings by 2028. This projection assumes 3.1% annual revenue growth and a $2.8 billion increase in earnings from the current $14.6 billion.

Uncover how Home Depot's forecasts yield a $427.75 fair value, a 4% upside to its current price.

Exploring Other Perspectives

Seven members of the Simply Wall St Community estimate Home Depot’s fair value between US$300.67 and US$427.75 per share. While many are optimistic about demand for smaller projects, several stress that sustained profit growth could be challenged by rising costs and earnings headwinds.

Explore 7 other fair value estimates on Home Depot - why the stock might be worth as much as $427.75!

Build Your Own Home Depot Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Home Depot research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.
• Our free Home Depot research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Home Depot's overall financial health at a glance.

Interested In Other Possibilities?

The market won't wait. These fast-moving stocks are hot now. Grab the list before they run:

• Find companies with promising cash flow potential yet trading below their fair value.
• Trump's oil boom is here - pipelines are primed to profit. Discover the 22 US stocks riding the wave.
• Rare earth metals are the new gold rush. Find out which 28 stocks are leading the charge.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com