Home Depot (HD) Stock Tumbles to Two-Year Low Despite Beating Q1 Estimates

Key Takeaways

• Home Depot’s Q1 fiscal 2026 revenue climbed 4.8% to $41.77 billion, exceeding forecasts, though earnings per share declined to $3.43 from $3.56 year-over-year
• Shares temporarily dipped beneath $290, marking the lowest trading level since late 2023 and pushing dividend yields north of 3%
• Comparable store sales increased a modest 0.6%, while U.S. comparable sales advanced only 0.4%
• Company executives maintained their full-year sales growth projection of 2.5%–4.5% without any upward revision
• Wall Street analysts maintain a “Moderate Buy” consensus with an average price projection of $392.45

Despite surpassing analyst expectations for both revenue and earnings in the first quarter, Home Depot shares tumbled to their lowest level in two years. While the quarterly performance was solid on paper, it failed to inspire confidence in the company’s near-term trajectory.

The Home Depot, Inc., HD

Shares momentarily traded below the $290 threshold on Tuesday after the earnings release, a price point unseen since the final months of 2023. HD has since bounced back modestly to approximately $302, though this remains significantly below its 52-week peak of $426.75.

First-quarter fiscal 2026 revenue reached $41.77 billion, representing a 4.8% year-over-year increase and surpassing the Street’s $41.59 billion expectation. Earnings per share of $3.43 topped the $3.41 consensus, despite declining from the prior year’s $3.56.

Comparable store sales metrics painted a more sobering picture. Overall comp sales advanced a mere 0.6%, with domestic comparable sales growing just 0.4%. Customer traffic declined, with comparable transactions falling 1.3%, although those who visited stores increased their spending. The average transaction size climbed 2.3% to $92.76.

Forward Outlook Remains Unchanged

Home Depot maintained its fiscal 2026 full-year projections. Total sales growth continues to be anticipated within the 2.5% to 4.5% range, with adjusted earnings per share expected to remain flat or increase up to 4%. The analyst community is projecting full-year EPS of $15.02.

CFO Richard McPhail recognized that shoppers are experiencing strain from elevated fuel costs and affordability challenges. The residential real estate market continues to weigh on performance — persistently high mortgage rates have kept housing turnover at multi-decade lows, which typically postpones larger remodeling projects that fuel HD’s strongest growth periods.

Return on invested capital decreased to 25.4% from 31.3% in the comparable period last year, partially impacted by debt associated with recent strategic acquisitions.

Expanding the Professional Contractor Segment

Home Depot has been leveraging the current slowdown to strengthen its Professional contractor business. The $18.25 billion SRS Distribution acquisition completed in 2024 unlocked a substantial new market opportunity. The retailer subsequently added building products distributor GMS to its portfolio, and earlier this month SRS finalized the purchase of Mingledorff’s, an HVAC distributor operating 42 locations throughout the southeastern United States.

Company leadership estimates these strategic transactions expand Home Depot’s total addressable market to approximately $1.2 trillion, with HVAC distribution contributing roughly $100 billion to that figure.

Regarding shareholder returns, HD increased its quarterly dividend 1.3% this February to $2.33 per share, establishing an annualized yield near 3.1% at prevailing prices — exceeding its 10-year historical average of approximately 2.4%. The retailer has now distributed dividends for 156 consecutive quarters.

Institutional ownership remains robust. IFP Advisors expanded its HD holdings by 16.1% during Q4, purchasing an additional 4,369 shares. Multiple analysts reduced their price objectives following the report, although the consensus rating stays at “Moderate Buy” with an average target of $392.45.

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