# Home Depot (HD)

Sector: Home improvement retail

| Field | Value |
|---|---|
| Price | $305.31 |
| Fair value (Analysts) | $325.00 |
| Discount to fair value | 6.1% |
| Fair value uncertainty (Analysts) | Medium |
| Economic moat (Analysts) | Wide |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 2.32 |
| Data as of | 2026-10-15 |
| Next earnings | 2026-11-17 (confirmed) |

## In short

Few homes change owners and large projects stay weak, so Home Depot must show positive transactions and steady margins in the next two to four quarters for the gap to close.

## Themes and gap

- Themes: Interest rates (interest-rates), Weak consumer (weak-consumer)
- Gap type: Can close (closable)
- Why: The Q3 fiscal 2026 report on November 17, 2026 and the fiscal 2027 guidance in February 2027 show whether sales grow without help from acquisitions and tariff refunds.

## About

Home Depot is the largest home improvement retailer in the world, with net sales of $164.7 billion in fiscal 2025. At the end of Q2 fiscal 2026 (August 2, 2026), it operated 2,364 stores in the US, Canada and Mexico, and more than 1,340 SRS locations. It sells tools, building materials, lumber, appliances, garden products and decor in stores and online, and it also offers installation services and tool rental. Its customers are do-it-yourself homeowners and professional contractors (Pros). Through SRS, which it bought in June 2024, it distributes roofing, pool, landscape and other building products to trade customers. SRS added GMS, a distributor of drywall, ceilings and steel framing, for $5.1 billion in September 2025, and Mingledorff's, an HVAC distributor, for about $1.1 billion in May 2026. Home Depot makes money from the margin on the products it sells, which was 33.7% of sales in Q2 fiscal 2026.

## Thesis

Home Depot trades at a discount because its sales depend on a housing market that has not recovered. Few homes change owners, and management said in August 2026 that housing turnover has never been lower as a share of the housing stock. When fewer people move, they start fewer large projects, and larger discretionary projects stayed under pressure in Q2 fiscal 2026. Comparable sales grew only 1.7% in Q2 fiscal 2026, from a higher average ticket, while comparable transactions fell 1.0%. Most of the sales growth comes from acquisitions (GMS and Mingledorff's), which Home Depot paid for partly with debt. The Q2 gross margin also included $685 million of one-time IEEPA tariff refunds, which management uses to offset higher fuel, energy and product costs over the year. CEO Ted Decker started a temporary medical leave in August 2026, and two senior executives lead the company until he returns. For the gap to close, comparable sales must stay in the guided range of flat to 2% for fiscal 2026, comparable transactions must turn positive, and the 2027 outlook must show growth without the help of tariff refunds. Decker's return, or a clear plan for the CEO role, also removes a doubt. A fall in mortgage rates that lets housing turnover recover is the strongest trigger, but management saw no sign of it in August 2026. The first test is the Q3 fiscal 2026 report on November 17, 2026. The second test is the Q4 report and the fiscal 2027 guidance, expected in February 2027. The gap can close over the next two to four quarters if demand holds. The main risk is that housing stays frozen and comparable sales stay near zero.

## Checkpoints

- Nov 17, 2026: Q3 fiscal 2026 results: comparable sales and margin. Status: Pending. Watch: Comparable sales growth near 2% with transactions that stop falling, and fiscal 2026 guidance kept, pass; negative comparable sales or a cut to guidance fails.
- Feb 2027 (estimate): Q4 fiscal 2026 results and fiscal 2027 guidance. Status: Pending. Watch: A fiscal 2027 outlook with positive comparable sales and a stable margin without tariff refunds passes; lower margin guidance or flat sales fail.
- Q1 2027 (estimate): CEO leadership: Decker's return or a succession plan. Status: Pending. Watch: Ted Decker back in his role, or a clear CEO plan from the board, passes; a long leave with no update fails.

## Balance sheet

- Cash: $2.1B
- Debt: $49.8B
- Net debt: $47.7B
- EBITDA, last 12 months: $25.3B
- Net debt / EBITDA: 1.9× (low)
- Interest cover: 9.9×
- Undrawn credit line: $11.0B
- Debt due within 12 months: $8.6B

Debt is mostly unsecured senior notes of the parent, plus commercial paper. At August 2, 2026, the debt figure excludes $3.1 billion of finance lease liabilities that the balance sheet includes in long-term debt, and it excludes $9.7 billion of operating lease liabilities. Commercial paper was $4.2 billion at a weighted average rate of 3.8%, and $4.4 billion of long-term debt was due within one year. The commercial paper program allows up to $11.0 billion and is backed by $11.0 billion of undrawn credit facilities: $3.5 billion to May 2030, $3.0 billion to July 2028 and a new $4.5 billion facility to July 2027. Home Depot repaid $2.8 billion of senior notes in the first half of fiscal 2026 and issued no new notes. EBITDA is operating income plus depreciation and amortization for the 12 months to August 2, 2026. Interest cover is for the first half of fiscal 2026. Debt rose after the purchase of SRS in June 2024 and GMS in September 2025, and paying it down limits share buybacks. Return on invested capital fell to 24.8% in the 12 months to Q2 fiscal 2026, from 27.2% a year earlier.

As of 2026-08-02.

Sources:

- https://www.sec.gov/Archives/edgar/data/354950/000162828026058715/hd-20260802.htm
- https://www.sec.gov/Archives/edgar/data/354950/000035495026000145/hd_exhibit991x08022026.htm
- https://www.sec.gov/Archives/edgar/data/354950/000162828026019436/hd-20260201.htm
- https://ir.homedepot.com/~/media/Files/H/HomeDepot-IR/2026/hd-2q26-transcript.pdf

## Recent events

- 2026-08-20: Home Depot declared a quarterly dividend of $2.33 per share. It also gave restricted stock to three executives whose roles grew on July 30, 2026, including CFO Richard McPhail, who now coordinates the Pro businesses (Home Depot Pro, HD Supply, SRS and Construction Resources).
- 2026-08-18: Home Depot reported Q2 fiscal 2026 results. Sales were $47.9 billion, up 5.7%. Comparable sales grew 1.7%, and US comparable sales grew 1.3%. The average ticket rose 2.8%, and transactions fell 1.0%. Diluted EPS was $4.79, and adjusted EPS was $4.92, up 5.1%. IEEPA tariff refunds lowered the cost of sales by $685 million. Home Depot kept its fiscal 2026 guidance.
- 2026-08-12: Home Depot said that chair, president and CEO Ted Decker will take a temporary medical leave. The company expects him to return within the next few months. Senior EVP Ann-Marie Campbell oversees daily operations, CFO Richard McPhail oversees finance and the Pro businesses, and lead director Greg Brenneman chairs the board.
- 2026-05-19: Home Depot reported Q1 fiscal 2026 results. Sales were $41.8 billion, up 4.8%. Comparable sales grew 0.6%, and US comparable sales grew 0.4%. Adjusted EPS was $3.43, down from $3.56. CEO Ted Decker said that demand was similar to fiscal 2025, despite more consumer uncertainty and housing affordability pressure.
- 2026-05-11: SRS, a Home Depot subsidiary, completed the purchase of Mingledorff's, an HVAC distributor in the southeastern US, for about $1.1 billion in cash.

## Risks

- High: Housing turnover is at a record low as a share of the housing stock, and management saw no sign of a recovery in August 2026. Higher mortgage rates keep owners in their homes and delay large remodeling projects. Comparable transactions fell 1.0% in Q2 fiscal 2026.
- Medium: The Q2 fiscal 2026 gross margin included $685 million of IEEPA tariff refunds, and management said that almost all expected refunds are now received. Higher fuel, energy and product input costs can lower the margin when the refunds stop.
- Medium: Home Depot spent about $6.2 billion on GMS and Mingledorff's in 2025 and 2026. Distribution has lower margins than retail, and GMS and Mingledorff's lowered the Q2 fiscal 2026 gross margin by about 60 basis points. A slow integration or a fall in construction demand can lower returns.
- Medium: CEO Ted Decker is on temporary medical leave since August 2026, and the company gave no date for his return. A long absence can delay decisions and adds uncertainty about the succession.
- Low: Debt is about $49.8 billion, and short-term debt and current installments were about $8.6 billion at August 2, 2026. Higher interest rates make refinancing more expensive.

## Links

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- History of changes: https://picks.kamadorueda.com/company/HD/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/HD.json

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