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Home Depot, Lowe’s to see higher sales as owners remodel amid rising rates

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Nov 14 (Reuters) – The Home Depot Inc (HD.N) and Lowe’s Cos Inc (LOW.N) are expected to post higher sales in the third quarter as Americans continue to spend on home improvements, unlike in other retailers facing lower discretionary spending. due to soaring prices.

Wall Street analysts see America’s biggest home improvement chains benefiting as rising interest rates encourage homeowners to renovate existing properties rather than move on, while professional contractors have a backlog of work to eliminate.

“While the mainstream narrative suggests otherwise, the sky is not falling on housing retail yet,” Wells Fargo analyst Zachary Fadem said in a note.

THE CONTEXT

Home improvement chains have seen sales and profits surge during the pandemic as Americans hunkered down at home rearranged their living spaces.

As demand is expected to slow, rising mortgage rates and house prices are giving households another reason to redevelop their existing properties.

“Home Depot and Lowe’s no longer have the most captive consumer base they had throughout 2020. Yet consumers continue to spend heavily on the home,” said David Bellinger, analyst at MKM Partners.

Paints and coatings maker Sherwin-Williams Co SHW.N said last month that professional contractors still had backlogs that would see them through the end of the year or even longer.

“The aging home continues to need more renovations, more updates, people aging in place, and we’re seeing that,” Sherwin-Williams general manager John Morikis said.

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THE FUNDAMENTALS

** Home Depot is expected to report third-quarter revenue of $37.96 billion, up more than 3% from a year ago, while Lowe’s is expected to post an increase of about 1% at $23.13 billion.

** Analysts expect Home Depot to post earnings of $4.12 per share, while Lowe’s is expected to post earnings of $3.10 per share.

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WALL STREET FEELING

** The Home Depot is rated “buy” on average among 36 brokerages; Lowe’s has a consensus “buy” rating among 33 analysts

** Median price target for Home Depot is $345.50, while Lowe’s is $235

** Home Depot shares are down about 24% year-to-date, with Lowe’s down more than 19%, on fears of slowing demand

Reporting by Deborah Sophia in Bengaluru; Editing by Sriraj Kalluvila

Our standards: The Thomson Reuters Trust Principles.

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