Home Depot Inc (NYSE: HD) is inching up on Tuesday even after reporting slightly weaker-than-expected financials for its Q2 as homeowners stuck with the “deferral mindset” in recent months.
Investors are cheering HD shares primarily because the management maintained its guidance for the full year. The home improvement retailer continues to see a 2.8% year-on-year increase in total sales in 2025.
While coming in shy of quarterly estimates is hardly a bullish sign, John San Marco – a Neuberger Berman analyst – says Home Depot stock remains a better investment than peer Lowe’s at current levels.
What makes Home Depot stock a better investment than Lowe’s?
According to John San Marco, Home Depot’s long-term strategy gives it a clear edge over Lowe’s.
While both retailers are poised to benefit from a more confident consumer willing to spend on big-ticket DIY projects, HD has spent the last decade building out its capabilities to serve professional contractors.
These larger, planned purchases represent a much bigger market opportunity – selling the same products to the same customers, but with far more use cases.
In a CNBC interview, the Neuberger Berman expert also said that recent acquisitions really aimed at diversifying the supply chain have positioned Home Depot shares to weather economic shocks more effectively.
Lowe’s, by contrast, hasn’t pursued aggressive expansion into the pro segment or strategic M&A – leaving it more exposed to cyclical headwinds.
What’s next for HD shares?
San Marco believes the worst may now be behind the home improvement sector. “We have gone from bad to less bad, and I think this is the quarter where we turn the corner.”
He points to a key inflection point: it’s been three years since interest rates surged, and housing turnover responded immediately. That matters because new homeowners typically spend heavily on renovations during their first three years.
With that digestion period now complete, spending patterns may normalize, and Home Depot stock is well-positioned to capture that rebound.
In short, as the cycle shifts from contraction to lukewarm growth, the Neuberg Berman’s research analyst expects HD’s hidden strengths – particularly in its pro business – to shone more visibly in public markets.
What a September Rate Cut May Mean for Home Depot Shares
Note that Home Depot’s full-year outlook does not price in any rate cuts in the second half of 2025. However, expectations more broadly are for the Fed to announce its next rate cut in September.
The shift in monetary policy could prove meaningful for HD stock as lower borrowing costs tend to stimulate housing activity – which in turn drives demand for home improvement products and services.
For Home Depot, therefore, an interest rate cut next month could mean accelerated growth in both DIY and pro segments. A healthy 2.26% dividend yield makes up for another great reason to stick with HD shares at current levels.
Finally, Home Depot is committed to limiting foreign sourcing to just 10% to minimise the impact of tariffs as well, which is why it remains an “overweight” rated stock among Wall Street analysts.
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