Home Depot and Lowe’s care about aging homes, not new houses

  • New housing starts soared over the summer, but that doesn’t matter much to home improvement retailers like Home Depot and Lowe’s.
  • Speaking at Goldman Sachs’ virtual retail conference this week, the CEOs of both companies clarified that their businesses are not dependent on new home construction.
  • In fact, Lowe’s CEO Marvin Ellison said that the aging housing stock in the US is good for business. 
  • “If you’re living in one of those aging homes, it’s going to lend itself to you making those investments to modernize,” he said.
  • Visit Business Insider’s homepage for more stories.

When it comes to the home improvement business, fixing up an older home is a far more lucrative than building a new one from scratch. 

That is at least the case for retailers like Home Depot and Lowe’s. The CEOs of both companies recently made comments during Goldman Sachs’ annual Global Retailing Virtual Conference suggesting

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Home Depot, Lowe’s Shares Ease After Oppenheimer Downgrade

Shares of Home Depot  (HD) – Get Report and Lowe’s  (LOW) – Get Report were gently pressured Friday after analysts at Oppenheimer downgraded the home-improvement retailers on concern about near-term risks. 

Home Depot and Lowe’s were both downgraded to perform from outperform. Home Depot’s price target was lowered to $305 from $320 and Lowe’s to $180 from $185. 

“To be clear, our favorable intermediate- to longer-term stance for the group
and HD and LOW is unchanged,” analyst Brian Nagel said. 

‘However, nearer term, we’re increasingly concerned
that the market is becoming too lax toward chances of a post-covid-19 sales growth
downshift at HD/LOW and [the] potential impact on shares,”

In a “post-pandemic reset” for home retail, Oppenheimer has a more favorable outlook for Lowe’s than Home Depot given its strengthening margins and discounted valuation. 

The firm lowered its fiscal 2021 earnings EPS estimate for Home Depot

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Dow Jones Sinks as Analyst Warns on Apple and Microsoft Valuations; Home Depot Stock Slumps on Slowdown Fears

The stock market was broadly lower on Friday, with the Dow Jones Industrial Average (DJINDICES:^DJI) down 0.13% at 12:05 p.m. EDT. The tech-heavy Nasdaq Composite was the worst performer among the major indexes, hurt by an analyst warning about tech stock valuations.

That warning pertained to Dow components Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), which are trading at historically high valuations after months-long rallies. Both stocks slumped on Friday, as did shares of Home Depot (NYSE:HD) following a separate analyst warning.

A risk dial turned to maximum.

Image source: Getty Images.

Barclays warns about big tech valuations

Mega-technology stocks like Apple and Microsoft have led the way since the market bottomed out earlier this year in the throes of the COVID-19 pandemic. Shares of Apple are up around 46% year to date, while shares of Microsoft have gained roughly 26% in the same timeframe.

This rally in tech stocks has pushed valuations to historically high levels.

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Oppenheimer downgrades Home Depot, Lowe’s on a ‘post-pandemic reset’ in home improvement retail

On Friday, Oppenheimer downgraded both Home Depot and Lowe’s to perform from outperform and lowered their price targets marginally. The firm disclosed that it still finds both companies favorable in the intermediate to longer-term stance, as shifts in consumer demands in the real estate and home improvement space are going to continue to fluctuate. Yahoo Finance’s Final Round panel break down the firm’s call and discuss the details.

Video Transcript

MYLES UDLAND: All right, welcome back to The Final Round here on Yahoo Finance. Time now for our call of the day. And today, we’re talking about Oppenheimer’s latest shares of Home Depot and Lowe’s, the firm downgrading both stocks to perform from– outperform. So overall, basically, kind of, I guess, pulling back maybe on these two names and saying that the boom we saw in the home improvement space during the early part of the pandemic is likely to

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Lowe’s targets professionals, and its main competitor Home Depot, with new services

Lowe’s Cos. second-quarter results got a bump from professional tradespeople, a group that usually favors the home improvement retailer’s main competitor, Home Depot Inc.
HD,
-0.83%

 

Lowe’s
LOW,
-0.95%

  reported profit and sales that were well ahead of expectations, and U.S. same-store sales growth of 35.1%, triple the 11.9% rise FactSet forecast.

Comparable sales in the professional category were up in the mid-20% range.

Lowe’s is taking aim at professionals with new initiatives and efforts designed for these shoppers, including a partnership with Stream for a free augmented reality video chat service called JobSight. Launched on June 1, it allows professionals to meet with clients virtually, a feature that’s particularly suited to the coronavirus pandemic.

Read:Transactions of $1,000 or more grew 16% at Home Depot during the second quarter

For professional loyalty customers, there’s a free one-year subscription to Home Advisor that comes will job leads and access to

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Oracle, Tesla, Home Depot, Beyond Meat & more

Check out the companies making headlines in the premarket Friday:

Home Depot (HD), Lowe’s (LOW) — An analyst at Oppenheimer downgraded both of the home improvement companies to “perform” from “outperform.” He also lowered his price targets on the two stocks, noting that, near term, “we’re increasingly concerned that the market is becoming too lax toward chances of a post-Covid-19 sales growth downshift at HD/LOW and potential impact on shares.” Home Depot and Lowe’s fell 1% and 1.4%, respectively.

Oracle (ORCL) — Oracle shares were down more than 1% after the Commerce Department said it will block U.S. users from downloading TikTok or WeChat starting Sept. 20. The announcement comes as Oracle tries to finalize a deal in which it will become the U.S. business partner of TikTok-parent ByteDance.

Ambarella (AMBA) — Ambarella shares rose more than 1% in the premarket after a Berenberg analyst initiated the semiconductor design company

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Why Is Home Depot (HD) Down 0.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Home Depot (HD). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Home Depot due for a breakout? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Home Depot Q2 Earnings & Sales Top Estimates

Home Depot has posted second-quarter fiscal 2020 results, wherein earnings and sales beat the Zacks Consensus Estimate and improved year over year. The company has benefited from increased investments across the business, which allowed it to respond quickly to changing customer preference during the coronavirus pandemic. Further, it expects momentum in its One Home Depot investment strategy to help

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3 Ways Lowe’s Topped Home Depot This Quarter

The results are in, and it’s clear that the home improvement industry was booming in the second quarter. Both Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) announced more than 20% sales growth along with soaring profits as consumers redirected spending from categories like eating out and vacationing toward their homes.

Yet for the second quarter in a row, Lowe’s bested its larger rival in some key categories, including revenue gains. Let’s look at that metric and two others that suggest Home Depot has some work to do to close the performance gap between the two businesses.

A man and a woman paint a room together.

Image source: Getty Images.

1. Building on the growth wins

Since he took over the CEO spot in mid-2018, Marvin Ellison, who used to be an executive at Home Depot, has been telling investors that Lowe’s can compete at the top of the home improvement industry.

Ellison finally has some solid sales metrics to support

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Lowe’s Is Outperforming Home Depot

– By Nathan Parsh

The two leading home improvement retailers both released earnings results this week. The Home Depot Inc. (NYSE:HD) reported Tuesday and produced what I felt was a monster quarter. The company’s year-over-year growth rates surpassed what analysts had expected on nearly every metric.

It was rival Lowe’s Companies Inc. (NYSE:LOW) turn to go on Wednesday. As much as I liked Home Depot’s quarter, I thought Lowe’s was even better. This was the second quarter in a row that I believe Lowe’s outdid its main competitor. By almost every measurement, Lowe’s was superior to Home Depot.

Also working in Lowe’s favor is that the stock is considerably cheaper compared to its historical valuation than what Home Depot is at the moment. I believe Lowe’s can still be bought at the current price. Let’s dig into the company’s earning release to find out why.

Quarterly highlights

Lowe’s released earnings

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Is Home Depot (HD) Benefiting From the Stay-at-Home Trend?

The Home Depot Inc. HD, which is a leading home-improvement retailer in the United States, is one of the prime beneficiaries of the coronavirus pandemic-induced a stay-at-home trend across all regions. This trend has proved to be a blessing for the home improvement industry. Notably, there has been a marked increase in repairs and home-remodeling projects in the past few months, as people are spending more time at home due to the increased work-from-home situation.

The company noted that accelerated customer engagement for home improvement in the second quarter of fiscal 2020 led to strong growth in its Pro and DIY customer categories. Notably, it witnessed strong demand for exterior and interior projects like deck building, painting projects, landscape work and home repairs due to increase wear and tear. As a result, DIY sales outpaced Pro sales growth in the fiscal second quarter.

Further, its Pro customers’ sales accelerated significantly

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