Home Depot Stumbles on Q2 Earnings -- but Says It's Still on Track for the Year

This article first appeared on GuruFocus.

Home Depot (HD, Financials) didn't have a perfect quarter but it's not sweating it.

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The world's largest home improvement chain came in just below expectations for both revenue and earnings; $45.28 billion in sales versus $45.36 billion expected, and $4.68 in earnings per share, a hair below the $4.71 estimate. But Wall Street didn't blink; the stock actually rose nearly 3% in early trading.

So what gives?

For starters, Home Depot is still growing slowly but surely. U.S. same-store sales rose 1.4%, marking the third straight quarter of gains. The company credits a delayed spring and a shift in consumer behavior; more shoppers are rolling up their sleeves for smaller, do-it-yourself projects instead of gutting kitchens or remodeling basements.

The momentum that began in the back half of last year continued, said CEO Ted Decker; the big-ticket splurges may be fading, but people are still spending just a little more cautiously.

Analysts are seeing the same thing. Consumers are being selective, said Telsey Advisory's Joseph Feldman; and given where interest rates and inflation are, that's not surprising. People are tightening up focusing on what needs fixing, not what's just nice to have.

Even with the softer numbers, Home Depot isn't backing away from its outlook. It's sticking to its 2025 guidance: sales should rise about 2.8%, and earnings are expected to dip by around 2% compared to last year. That's steady-as-she-goes performance nothing flashy, but nothing falling apart either.

The company also said it's holding the line on pricing mostly. Despite tariff changes, it's keeping prices flat on most products, thanks in part to the fact that over 50% of its inventory is sourced in the U.S. There will be modest movement in some categories, CFO Richard McPhail said; but the hikes won't be widespread.