Home Depot just did something it hadn’t managed in a full year — beat Wall Street’s earnings estimates. Shares jumped more than 3% on Tuesday after the home improvement giant posted Q4 numbers that topped expectations on both the top and bottom line. But underneath the headline beat, the story is more complicated than it looks.
Here’s what Home Depot delivered for its fiscal fourth quarter: adjusted earnings per share of $2.72 versus the $2.54 analysts expected, and revenue of $38.2 billion versus the $38.12 billion consensus. Sounds solid. But total sales actually declined about 4% year-over-year, dragged down partly by the prior fiscal year having an extra week worth $2.5 billion in revenue. Net income fell to $2.57 billion from $3.0 billion in the same period a year ago.
CFO Richard McPhail didn’t sugarcoat it: “We’ve been in a frozen housing environment for three years.” That’s the core issue. With mortgage rates having pinned homeowners in place, the big-ticket projects that typically accompany buying or selling a home — kitchen remodels, bathroom upgrades, new flooring — simply aren’t happening at historical rates. Store transactions dropped 1.6% year-over-year, even as average ticket rose 2.4%, mostly on modest price increases.
But here’s where it gets interesting for investors watching the housing cycle. Mortgage rates just fell to 5.99% — their lowest level since 2022. If rates continue to drift lower, the housing market could finally start to thaw, and Home Depot sits directly in the path of that spending wave. The company’s biggest selling season, spring, is right around the corner.
The pro business — contractors, roofers, landscapers — remains the bright spot. Home Depot’s $18.25 billion acquisition of SRS Distribution in 2024 and its $4.3 billion purchase of GMS last year are paying off, even if SRS itself saw a low single-digit sales decline in Q4. Pro sales outpaced DIY throughout the quarter.
On tariffs, CEO Ted Decker is playing it cautious. After the Supreme Court struck down IEEPA tariffs last week and the administration pivoted to a proposed 15% across-the-board global duty, Home Depot says it’s “still in the middle of our analysis.” More than half of what the company sells is sourced domestically, and it’s diversified imports so no single foreign country represents more than 10% of purchases.
The company’s full-year guidance calls for 2.5% to 4.5% total sales growth and flat to 4% adjusted EPS growth — not exactly electrifying, but enough to suggest management sees stability, not deterioration. Home Depot also quietly laid off 800 employees and mandated a five-day return-to-office policy in January, signaling a focus on cost discipline while waiting for demand to recover.
The bottom line? Home Depot is a coiled spring. It’s gaining market share in a down market, the pro business is structurally stronger post-SRS, and falling mortgage rates could be the catalyst that unlocks three years of pent-up housing demand. The earnings beat is nice. The setup heading into spring might be even better.