Loop Capital raises Home Depot, Lowe's on bottoming demand

Investing.com -- Loop Capital upgraded its ratings for Home Depot (NYSE:HD ) and Lowe's (NYSE:LOW ) from Hold to Buy, citing recent store checks and conversations with management that indicate a bottoming demand in the home improvement sector.

The analysts raised their price target for Home Depot (HD) from $360 to $460 and for Lowe's (LOW) from $250 to $300, anticipating a more favorable economic environment as the Federal Reserve moves toward lowering interest rates.

Despite the upgrades, Loop Capital has kept its fiscal 2024 revenue estimates unchanged, noting that recent storm damage might disrupt sales in the current quarter.

However, they expect investors to look beyond these short-term challenges, anticipating a lift in future demand as affected areas begin repairs.

"We are pleased with the quick resolution to the port strike, as we saw a prolonged strike as a material risk," the firm remarked.

Loop Capital has also raised its fiscal 2025 estimates due to extreme weather events and the easing interest rate cycle. They project Home Depot's earnings per share (EPS) for fiscal 2025 to exceed consensus estimates by 44 cents, while Lowe's EPS is estimated to be six cents above consensus.

The analysts noted that "stores look great, and promotions seem normalized," indicating improved inventory levels for seasonal products like Halloween and Christmas items.

While they expect single-digit same-store sales growth for both companies, they highlighted that Home Depot's acquisition of SRS presents a greater growth opportunity compared to Lowe's.

"We expect HD's long-term growth to accelerate into the high-single digits, compared to LOW in the mid-single digits," concluded the firm.

Source: Investing.com