RBC Capital maintains Home Depot at Sector Perform, steady stock target

On Tuesday, RBC Capital Markets maintained its Sector Perform rating on Home Depot (NYSE:HD) shares, with a steady price target of $377.00. The firm's stance comes with an expectation of a more favorable rate environment in fiscal year 2025, which could benefit the company after a period of softer comparable sales.

Home Depot (NYSE:HD), a leading home improvement retailer, has been navigating through a market where investors are advised to anticipate further quarters of underlying comparable sales softness. According to RBC Capital Markets, this trend is expected to continue in the near term.

The firm's analysis suggests that while the current performance metrics may not be robust, the upcoming fiscal year holds potential for improvement. The anticipation of a lower rate environment in fiscal year 2025 is seen as a positive reset for the company's comparables.

Despite the near-term challenges, the maintained price target reflects a level of confidence in Home Depot's ability to weather the softer sales environment. The Sector Perform rating indicates that the firm views Home Depot's stock as likely to perform in line with the expectations for the sector.

Investors are encouraged to look beyond the immediate quarters and consider the potential for Home Depot's performance to align with the sector's overall trajectory, especially as the rate environment changes. The company's strategic positioning and market performance will continue to be monitored closely by RBC Capital Markets and other industry watchers.

In other recent news, Home Depot has experienced significant changes in its financial outlook. The company's second-quarter earnings per share (EPS) came in at $4.60, surpassing Stifel's estimate of $4.35, despite a decline in comparable sales of -3.3%. However, Home Depot's guidance for fiscal year 2024 indicates a downturn, with comparable sales expected to fall between -4% and -3%. The company's Strategic Retail Solutions (SRS) initiative is projected to contribute $6.4 billion in revenue.

Truist Securities, Jefferies, and Stifel have all adjusted their price targets for Home Depot. Truist Securities lowered its target to $396 from $406, while Jefferies raised its target to $426 from $412. Meanwhile, Stifel maintained its hold rating on Home Depot shares with a price target of $380.

Home Depot has also revised its annual earnings outlook due to a decrease in consumer spending on home improvement projects. It now expects diluted earnings per share to decrease between 2% and 4%, and annual comparable sales to fall between 3% and 4%.

Despite these challenges, Home Depot raised its total sales forecast to a range of 2.5% to 3.5% and anticipates the acquisition of SRS Distribution to close in the second half of the year, adding approximately $6.4 billion. These are the latest developments in Home Depot's performance, as reported by various financial firms.

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