Home Depot Inc (NYSE:HD) has an edge over Lowe’s Companies Inc (NYSE:LOW) ahead of fourth-quarter earnings, according to JPMorgan’s Christopher Horvers.
“We believe HD is likely to outcomp LOW in 4Q,” he says, citing stabilizing consumer trends, cutting-edge technology, and its acquisition of SRS Distribution.
Horvers also mentions that the “COVID share of wallet pullforward is behind us.” Consumers have adjusted to the higher rates and are accepting the new housing market dynamics.
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Existing home sales turnover should stabilize at 3-4%. That sets a solid foundation for industry growth.
Analysts expect same-store sales growth for 2025 to be moderate for both Home Depot and Lowe’s, with challenges from larger-ticket items easing up, Horvers adds.
AI And Automation Take The Lead
Home Depot is focusing on technology to enhance its operational efficiency. Horvers notes, “HD continues to lead in terms of adopting technology to drive in-stocks and inventory productivity.”
He highlights AI and the use of computer vision to track shelf availability, calling it a multi-year opportunity for improvement in inventory management.
The SRS Factor: A Key Growth Catalyst
Home Depot’s acquisition of SRS Distribution is proving to be a strategic win.
Horvers notes that management sees no negative surprises with the acquisition.
So far, SRS bolstered Home Depot’s vendor relationships. It’s also helping the company expand its presence in roofing, landscape, and pool supplies, he adds.
Lowe’s Lags As Home Depot Powers Ahead
While Lowe’s remains a strong competitor, Home Depot’s greater exposure to the West Coast, where home sales are rebounding, gives it a clear advantage. Horvers mentions that Home Depot benefits from the dynamic of storm recovery, as areas like Florida are recovering faster than North Carolina. He also believes that SRS will add about 75 bps to comps when it enters the comp base in mid-2Q25.
With Home Depot’s fundamentals improving after years of COVID-related disruption, Horvers maintains an “Overweight” rating, projecting a potential valuation peak of 30x earnings. The competition between the two home improvement giants is intensifying, and for now, “we believe HD is likely to outcomp LOW in 4Q.”