Home Depot's (HD) Q2 results "strengthen" the case that the company can generate growth ahead of a broader home-improvement recovery, supported by execution, "strategic investments" and market-share gains, UBS Securities said in a report emailed Wednesday.
Comparable sales rose 1.7%, above the 1.1% consensus estimate, with broad-based strength across professional customers and consumers focused on smaller maintenance and repair projects, the firm said. Early Q3 demand trends are also tracking in line with Q2 levels, the report said.
Despite the stronger quarter, Home Depot reaffirmed its fiscal 2026 outlook for comparable sales ranging from flat to up 2%, according to the report. The firm said the midpoint implies about 0.8% growth in H2 and appears "conservative" given current demand trends.
Gross margin remains a near-term concern, with the firm expecting a roughly 60-basis-point decline in Q3 as tariff refund benefits fade and fuel and other costs remain "elevated," the firm said. The company's management expects margins to stabilize in Q4, according to the report.
UBS has a buy rating on Home Depot and lowered its price target to $420 from $430.
Price: $344.14, Change: $+6.65, Percent Change: +1.97%