What Home Depot’s earnings mean for the future of the housing market

Home Depot raised its fiscal outlook after strong third-quarter 2024 sales, driven by demand for seasonal goods and hurricane preparation in the Southeast. 

The world’s largest home improvement retailer and fourth-largest U.S. retailer by market capitalization reported $40.2 billion in sales for the quarter ending Oct. 27. That exceeded analysts’ projections of $39.31 billion. Revenue was up 6.6% from Q3 2023 despite a drop in big-ticket remodeling projects that were attributed to higher interest rates and economic uncertainty.

Comparable sales declined 1.3% during the year, including a 1.2% drop in the U.S. — a smaller pullback than the anticipated 3.1%.

“While macroeconomic uncertainty remains, our third quarter performance exceeded our expectations,” Ted Decker, Home Depot’s chair, president and CEO, said in a statement. “As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects, as well as incremental sales related to hurricane demand.”

In the company’s earnings call on Tuesday morning, Decker shared that while certain consumer expenditures remain resilient due to necessity, it also underscores the variability and potential unpredictability of sales driven by seasonal trends and extreme weather.

“From a geographical perspective, storms and more favorable weather throughout the quarter drove a higher degree of variability in the performance across our divisions, and four of our 19 U.S. regions delivered positive [comparable sales],” he said. 

While homeowners may be less inclined to take on extensive remodeling projects or assume additional debt due to higher interest rates, they’re still investing in necessary maintenance and upgrades — especially seasonal ones, Decker suggested on the earnings call.

“As weather normalized, we saw better engagement across seasonal goods and certain outdoor projects … we continue to see pressure on larger remodeling projects, driven by the higher interest rate environment and continued macroeconomic uncertainty,” Decker said.

In the third quarter, Home Depot posted an operating income of $5.4 billion with a 13.5% margin, down from a margin of 14.3% in Q3 2023. Adjusted income was $5.6 billion with a 13.8% margin, compared to $5.5 billion and 14.5% last year.

Net earnings were $3.6 billion, or $3.67 per share, in Q3 2024. That was down from $3.8 billion, or $3.81 per share, in Q3 2023. Adjusted earnings per share fell from $3.85 to $3.78 during the year.

For fiscal year 2024, Home Depot updated its guidance based on the third quarter’s better-than-anticipated numbers. It expects a 4% sales increase, up from previous estimates of 2.5% to 3.5%. It also anticipates a 2.5% decline in comparable sales, less than the previously expected drop of 3% to 4%. Annual earnings are also projected to decline less than previously forecasted. 

The upward guidance revision suggests that while the U.S. housing market isn’t in rapid expansion, there’s still underlying stability as homeowners continue to spend on maintenance, necessary upgrades and other smaller projects.