Investing.com -- Evercore ISI has added Home Depot (NYSE:HD) to its Tactical Outperform list ahead of the company’s first-quarter earnings release on May 20.
The brokerage expects the retailer to reiterate its 2025 guidance for a 2% earnings per share (EPS) decline, or around $14.95, which is largely in line with consensus estimates.
Despite the stock being down 2% year-to-date, Evercore believes that maintaining guidance and signaling improving trends could be enough to lift the shares back toward the $400 level.
“As long as better trends into spring are confirmed, we believe the market reaction could prove similar to Walmart (NYSE:WMT) albeit with a bit more kick… a meet and keep with better trends is enough to move it back to $400+ levels last seen in January,” analysts led by Greg Melich said in a note.
Evercore is modeling a -0.5% comp for Q1, slightly below the flat consensus, and sees gross margins declining 30 basis points due to the SRS Distribution acquisition, which is expected to become a tailwind later in the year.
The analysts highlight that Home Depot continues to invest in technology, service, and new store openings, positioning itself to benefit from a future housing market recovery.
“With hopes rising for an improving Home Improvement market in 2025, we think investors would be well served by having real exposure to the turn,” the analysts wrote, noting Home Depot and Sherwin-Williams (NYSE:SHW) remain among their top five ideas.
While near-term demand remains soft due to high mortgage rates and weak existing home sales, recent signs are more encouraging. Pending home sales rose 6% in March, and home improvement retail sales jumped 3.2% in April—the strongest print since October 2022.
Evercore’s base case valuation of $400 assumes the stock normalizes at a 30% premium to the market on projected 2026 EPS of $16.60.
The bull case sees shares reaching $550 on $20 of EPS at a higher multiple, while the bear case implies a decline to $340 if comps deteriorate and earnings slip to $14.