Home Depot (HD) is facing headwinds of stalled housing turnover and a weak cost and demand outlook, which creates a risk in attaining its reaffirmed 2026 guidance, RBC Capital Markets said in a Tuesday note.
On the positive side, the company's Q1 total comparable sales grew 0.6% from a year ago, driven by higher average transaction values, partially offset by a decline in transactions. Home Depot is also poised to see an easier comparison in H2, assuming normal storm patterns, as the second half of last year had a historically light hurricane season, according to the note.
However, RBC analysts believe there is a risk to meeting its reaffirmed 2026 guidance, given the deteriorating consumer backdrop and higher cost outlook. The company's gross margin decline of 80 basis points was driven by its acquisition of GMS rather than a significant deterioration in core gross margin, the analysts noted.
RBC maintained the company's stock rating at sector-perform and reduced the price target to $340 from $377.
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