TD Cowen Cites ‘Strong Tariff Mitigation Tactics’ Post Home Depot’s Q1 Earnings

TD Cowen analyst Max Rakhlenko reiterated his “Buy” rating on Home Depot (HD) stock following its mixed Q1FY25 results. He was encouraged by the company’s efforts of maintaining product prices and gross margins despite tariff pressures, citing “retail leadership on display with strong tariff mitigation tactics.” Rakhlenko kept his near Street-High price target of $470, which implies an impressive 24.7% upside potential from current levels.

Home Depot’s Mixed Bag of Q1 Results

Home Depot’s revenue jumped 9.4% year-over-year to $39.86 billion, beating analysts’ consensus of $39.29 billion. However, adjusted earnings per share (EPS) of $3.56 came in slightly below consensus of $3.60. Nonetheless, Rakhlenko was encouraged by better-than-feared same-store-sales/comps at (0.3%), which was below consensus, but exceeded TD Cowen’s estimates of (1.2%). Importantly, the analyst was pleased that management did not lower its outlook but instead reiterated its FY25 guidance.

Based on management’s comments, Rakhlenko predicts that HD will not require “broad-based price increases” to mitigate tariffs. He modestly raised his first-half comps estimates, since uncertainty for the second half persists. Despite the challenges, the analyst is optimistic that HD will meet its FY25 guidance. He added that in Q1, homeowners continued engaging in smaller projects, while big-ticket purchases remained under pressure. Rakhlenko noted that April was the strongest month for HD, and the momentum has continued into May.

Key Takeaways from HD’s Results

The analyst pointed several key takeaways from Home Depot’s results and management call that keep him bullish on the stock. Let’s take a brief look at them.

• Worst Concerns have Passed – Rakhlenko highlighted management’s statement that the worst concerns have passed and that they expect to mitigate tariff impacts through a mix of sourcing diversification, vendor partnerships, supply chain, finding operational efficiencies, and other strategies.
• HD Could Benefit from Market Share Growth – The analyst is impressed by HD’s strategy to maintain product prices, while rivals have already started raising theirs. He believes that HD could benefit from market share growth due to this strategy.
• Strong Execution at SRS Distribution – Management noted that its SRS Distribution segment delivered strong execution in Q1, with market share growth across all verticals. SRS is a wholesale distributor of roofing materials, which was acquired by HD in March 2024 for $18.25 billion.

Is HD Stock a Good Buy?

Analysts remain divided on Home Depot’s long-term stock trajectory amid dimming consumer sentiment. On TipRanks, HD stock has a Moderate Buy consensus rating based on 21 Buys, seven Holds, and one Sell rating. Also, the average Home Depot price target of $427.50 implies 13.4% upside potential from current levels. Year-to-date, HD stock has lost 2.5%.

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