Wells Fargo analyst Zachary Fadem shared his outlook on Home Depot (HD) and Lowe’s (LOW) ahead of their second-quarter results. While maintaining Buy ratings on both stocks, the top-rated analyst said he continues to favor Home Depot over Lowe’s, citing stronger growth levers and a more favorable near-term outlook.
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Fadem is a five-star analyst on TipRanks, ranking #367 out of 9,948 analysts tracked. He boasts a 62% success rate and an average return per rating of 10.80%.
Home Depot Poised to Outperform Peers
Home Depot will report its second-quarter earnings before the opening bell on Tuesday, August 19. Analysts forecast earnings of $4.73 per share on revenue of $45.52 billion for the quarter.
Fadem projects a modest 1% comp gain for Q2, noting that weaker trends in May and June may be offset by stronger July results. He highlights improved foot traffic and momentum in pro-focused programs, including early benefits from the SRS Distribution acquisition, which expands Home Depot’s reach in key contractor markets.
In his view, these drivers, along with other long-term growth levers, position HD to outpace Lowe’s in the months ahead, even with some short-term risks.
Lowe’s Faces Execution Risks Despite Gains
Meanwhile, Lowe’s will report its second-quarter earnings before the opening bell on August 20. Analysts forecast earnings of $4.25 per share on revenue of $23.97 billion for the quarter.
Fadem expects Lowe’s to post a roughly 70bps comp gain in Q2, narrowing its gap with HD. July trends likely benefited from improved weather and targeted company initiatives. However, he warns that the second half of the year presents higher risks. He believes Lowe’s would need a sharp improvement in its two-year sales trends to meet guidance and warns that the ADG integration could put pressure on profit margins.
Although Lowe’s trades at a cheaper P/E than Home Depot, offering potential upside if interest rates ease, Fadem said the company has a higher execution bar to clear.
Macro Headwinds Still in Play
Fadem warns that high mortgage rates, possible tariff-related price increases, and tight credit could hurt both companies. These factors may slow sales and push back a wider recovery in home improvement spending. He adds that while some long-term supports remain, current market conditions will challenge both HD and LOW.
Which Is the Better Home Improvement Stock?
Using the TipRanks Stock Comparison Tool, we found that analysts currently favor Home Depot. Wall Street has a “Strong Buy” consensus on HD, with an average price target of $429.89, implying greater upside over the next 12 months compared to Lowe’s.
