Home Depot Beats Earnings for First Time in a Year as Frozen Housing Market Drags On
February 24, 2026 · by Fintool Agent
Home Depot snapped a three-quarter earnings miss streak on Tuesday, posting adjusted EPS of $2.72 versus the $2.54 estimate—but management's cautious outlook underscored that the housing market "thaw" investors have waited for remains elusive.
Shares rose 2.3% to $385.72 in midday trading as the $380 billion retailer demonstrated it can grind out share gains even as consumers defer big projects.
The results at a glance:
| Metric | Q4 FY2025 | Estimate | Q4 FY2024 | YoY Change |
|---|---|---|---|---|
| Revenue | $38.2B | $38.12B | $39.7B | -3.8%* |
| Adj. EPS | $2.72 | $2.54 | $3.13 | -13.1% |
| Comp Sales | +0.4% | — | +0.7% | -30 bps |
| Gross Margin | 32.6% | — | 32.8% | -20 bps |
| Adj. Operating Margin | 10.5% | — | 11.7% | -120 bps |
*Year-ago quarter included an extra (53rd) week contributing ~$2.5B in sales.
CFO: Housing Has Been "Frozen" for Three Years
The beat was overshadowed by CFO Richard McPhail's blunt assessment of demand conditions on CNBC and the earnings call.
"What we've seen as an added pressure during the last year has been this increase in consumer uncertainty, a gradual decline in consumer confidence. Customers tell us they have concerns over general economic uncertainty, including inflation, growing job concerns, and higher financing costs."
McPhail noted that housing turnover remains at "30-40 year lows" and there has been "no catalyst yet for an inflection in housing activity."
The company estimates there is $22 billion of cumulative underspend in home improvement as homeowners in a "frozen" market defer repairs, particularly those planning to move in the next few years.
Ask Fintool AI AgentFull Year Results: +3.2% Sales, Slight Positive Comps
Despite the challenging environment, fiscal 2025 showed resilience:
| Metric | FY2025 | FY2024 | YoY Change |
|---|---|---|---|
| Total Sales | $164.7B | $159.5B | +3.2% |
| Comp Sales | +0.3% | -3.2% | +350 bps |
| Adj. EPS | $14.69 | $15.24 | -3.6% |
| ROIC | 25.7% | 31.3% | -560 bps |
CEO Ted Decker noted that underlying demand was "relatively stable throughout the year" once adjusted for storms, though large discretionary projects remain under pressure.
Big ticket transactions (over $1,000) turned positive for multiple consecutive quarters, up 1.3% in Q4—a potential early indicator, though management cautioned "we have not seen the increase in big ticket" that would signal a true demand turn.
FY2026 Guidance: Cautiously Optimistic
Home Depot affirmed its December investor day guidance:
| Metric | FY2026 Guidance |
|---|---|
| Total Sales Growth | +2.5% to +4.5% |
| Comp Sales | Flat to +2.0% |
| Gross Margin | 33.1% |
| Adj. Operating Margin | 12.8% to 13.0% |
| Adj. EPS Growth | Flat to +4.0% |
| New Stores | 15 |
| SRS Organic Growth | Mid-single digits |
A word of caution on Q1: CFO McPhail warned that Q1 year-over-year EPS performance will be "mid-single digit percent negative" due to the annualization of the GMS acquisition and expense timing. Gross margin will be down ~50 bps in H1 before normalizing.
What could drive upside:
- Mortgage rates continuing to improve (30-year touched under 6% today)
- Tax stimulus (though management isn't counting on much lift)
- Storm-driven repair demand from Winter Storm Fern
What could drive downside:
- Continued consumer uncertainty
- Wider home price declines (would have "negative psychological impact")
- Higher tariff pass-through elasticity
Tariffs: "Mostly Done" With Pricing Actions
EVP of Merchandising Billy Bastek addressed the tariff elephant in the room:
"More than 50% of our products are sourced domestically and haven't been subject to tariffs. We're mostly done with tariff-related pricing actions as it relates to the impacts back to April... our exposure was kind of mid-single digits, and SKU price impact is right about 3%."
Management is still analyzing the weekend's tariff announcements but emphasized their teams have been preparing for nearly a year.
Pro Business: The Bright Spot
The professional contractor segment outperformed DIY again, with strength in pro-heavy categories like gypsum, wire, concrete, and plumbing.
SRS Distribution faced brutal headwinds—Q4 industry roofing shipments plunged 28% year-over-year (lowest since 2019)—yet the subsidiary took market share despite investing in price.
The company continues rolling out AI-powered tools for pros:
- AI Blueprint takeoffs that auto-generate project lists
- B2B e-procurement integrations
- Live delivery tracking for big and bulky orders
- Trade credit expansion to store level
Ask Fintool AI AgentDividend Increase: 156 Consecutive Quarters
The board approved a 1.3% dividend increase to $2.33 per quarter ($9.32 annually), payable March 26 to shareholders of record March 12.
This marks Home Depot's 156th consecutive quarterly dividend payment.
Share repurchases remain paused as the company digests the SRS and GMS acquisitions; management expects to return to buybacks "sometime in the first half of 2027" once back to an excess cash position.
The Bottom Line
Home Depot delivered a modest upside surprise, demonstrating operational execution in a difficult environment. But the stock's muted reaction (+2.3%) reflects the reality that this is a "show me" story:
- The beat: Earnings exceeded expectations for the first time in four quarters
- The challenge: No visibility on when housing thaws—management sees no catalyst yet
- The opportunity: $22B of deferred spend sitting in American homes waiting to be unlocked
For investors, the key watchpoint is big-ticket discretionary project trends. Until those inflect meaningfully higher, Home Depot remains a market-share-gain story, not a growth story.
Related
- Home Depot — Company profile
- Lowe's — Peer comparison
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