Home Depot Inc. HD reported a better-than-expected fourth quarter while issuing a cautious outlook for the next fiscal year. While the company remains confident despite “uncertain” macro conditions, this JPMorgan analyst terms the outlook as “conservative”.

What Happened: Home Depot during its earnings call predicted a 2% sales growth to $163.98 billion in fiscal year 2025, which was slightly under consensus. It expected the comparable sales to rise 1%, with a 13.4% operating margin. Adjusted EPS is expected to drop 2% to $14.94, also below estimates.

However, Richard McPhail, executive VP and CFO of the company predicted that the business momentum from late 2024 would continue into fiscal 2025.

“We are not assuming any meaningful changes to the macroeconomic environment. We expect our consumer will remain healthy. We are not assuming a change in the rate environment nor improvements in housing turnover,” he said.

CEO Ted Decker also reiterated that the home improvement retailer will “remain steadfast” with investments despite “uncertain macroeconomic conditions” fueled by a higher interest rate environment which impacts the home improvement demand.

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Why It Matters: JPMorgan analyst Christopher Horvers said that HD reported strong quarterly results with the first year-on-year earnings growth since the fourth quarter of 2022. However, he added that the “guidance appears conservative”. Horvers maintained an ‘overweight’ rating on the stock with a price target of $475 apiece.

The company exceeded fourth-quarter expectations, reporting $39.7 billion in sales, up 14.1%, and a $3.13 EPS, up 9.4%. Transactions increased by 7.6%, with modest comparable sales growth. Margins dipped slightly despite rising gross profit and operating income.  

Price Action: HD rose 2.84% on Tuesday, contrasting with a 0.50% fall in the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500 index.

The stock remains 1.24% higher on a year-to-date basis and up 5.84% over a year.

Benzinga tracks 29 analysts with an average price target of $427.56 for the stock, reflecting a “buy” rating. Estimates range widely from $318 to $475. Recent ratings from Telsey Advisory Group, and Wells Fargo average $453.33, suggesting a potential 14.77% upside.

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