Why Piper is bullish on home improvement stocks for the rest of 2025

Investing.com -- Piper Sandler maintained its upbeat outlook on Home Depot and Lowe’s for the remainder of 2025, citing a “high probability of an improved housing backdrop” and the likelihood of multiple Federal Reserve rate cuts.

In a research note ahead of second-quarter earnings from Walmart, Target, Home Depot and Lowe’s, the firm said it is “positive on WMT due to comp strength, share gains, & supplier ad spend, neutral on TGT due to low expectations, and bullish on HD/LOW for [the] rest of [the] year.”

With a “relatively benign CPI print for July,” Piper Sandler said the odds of a September rate cut have climbed to 94%, with the market now pricing in 2.5 cuts before year-end.

“Last year, HD/LOW showed solid outperformance in 2H with rate cut activity,” the analysts wrote, adding that they expect “home improvement tailwinds through end of year with interest rate cuts – similar to last year.”

The firm pointed to a similar setup in 2024 and 2025. As of Aug. 12 last year, Home Depot and Lowe’s had underperformed the S&P 500 by an average of 8.3%, and this year’s underperformance is nearly identical at 8.5%.

“HD and LOW shares then outperformed the S&P from mid-August through mid-October, with HD +19.1% and LOW +19.3%, vs. the S&P +8.8% in the same period,” the analysts noted.

Piper Sandler reiterated its Overweight ratings on Walmart, Home Depot, and Lowe’s, and its Neutral rating on Target . “We believe HD & LOW shares will likely outperform similar to last year following Q2 earnings as we get closer to Fed rate cuts,” the firm concluded.

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