Home Depot stock jumps 4% on Q4 earnings, Is it a buy?

Home Depot (NYSE:HD), the big box home improvement retailer, eked out an earnings beat in its fiscal fourth quarter, as the stock rose nearly 4%.

It was a bit of a relief for investors, as there was some uncertainty after Walmart reported mixed results with a weaker than expected outlook last week.

Home Depot generated $39.7 billion in sales in the fourth quarter, a hearty 14% increase over the same quarter a year ago. That was slightly better than the $39.16 billion that analysts had projected.

Comparable or same store sales rose 0.8% overall and 1.3% in the U.S. That is significant, as Home Depot had had eight straight quarters of same store sales declines, according to CNBC. It was also better than analysts expected, as the Street had projected a ninth straight quarter of same store declines, CNBC reported.

Net earnings for the fourth quarter were $3.0 billion, or $3.02 per diluted share. That was up about 7% from the fourth quarter of 2023 and slightly higher than the $3.01 per share that analysts anticipated.

“Our fourth quarter results exceeded our expectations as we saw greater engagement in home improvement spend, despite ongoing pressure on large remodeling projects,” Ted Decker, chair, president and CEO, said. “Throughout the year, we remained steadfast in our investments across our strategic initiatives to position ourselves for continued success, despite uncertain macroeconomic conditions and a higher interest rate environment that impacted home improvement demand.”

Is Home Depot stock a buy?

The stock ticked higher likely on the stronger same store sales, as well as the outlook for that to continue. In its guidance, Home Depot targeted 1% growth in same store sales in 2025. That’s considerably better than the 1.8% drop in that metric in fiscal 2024.

Also, the company expects total sales growth of 2.8% this fiscal year, which would be lower than the 4.5% growth in 2024. Thirteen new stores are planned, up from 12 openings in 2024.

Further, it anticipates an operating margin of 13%, which would be down from 13.5% last year. Earnings are expected to decline 3% from $14.91 last year, with adjusted earnings expected to fall 2%.

Other than the comparable store sales numbers, the outlook is not all that impressive. However, the company did boost its dividend for the 16th consecutive year, raising the quarterly dividend by 2% to $2.30 per share.

Analysts have set a median price target of $450 per share for Home Depot, which would be about a 13% increase. That may be a bit too optimistic based on its soft outlook and the murky economic conditions that could slow home improvement. And the stock is not even that cheap for a stock that has only returned 6% over the past 12 months. There are probably better value options out there.