Chicago, IL – February 24, 2025 – Zacks.com releases the list of companies likely to issue earnings surprises. This week’s list includes Nvidia NVDA, Home Depot HD, Lowe’s LOW, TJX Companies TJX and Salesforce CRM.
Home Improvement Retailers Face Tough Earnings Environment
Home Depot, Lowe’s and TJX Companies are the key retailers coming out with quarterly results this week. However, many in the market will be waiting for Nvidia’s release after the market’s close on Wednesday, February 26th.
Home Depot shares have modestly done better than Lowe’s shares in the year-to-date period, though both have underperformed the broader market in a significant way.
The operating environment for Home Depot and Lowe’s remains challenging, as the interest rate backdrop continues to be unfavorable despite the U.S. Fed’s easing policy. As reconfirmed by Friday's weak January Existing Home Sales numbers, the resulting elevated mortgage rates remain a big headwind for sales.
While trends in New Home Sales have a bearing on aggregate construction activities and economic growth, the outlook for Home Depot and Lowe’s is closely tied to Existing Home sales as the maintenance, repairs, and remodeling projects for these older properties drive their sales. But with home prices still rising, albeit at a moderating pace, and mortgage rates remaining elevated, affordability issues keep potential buyers on the sidelines.
This unfavorable operating environment has been weighing on Home Depot’s same-store sales trend, which has been negative in each of the last 8 quarters. The current Zacks Consensus estimate is for a -1.7% same-store sales decline, which would follow the -1.3% comp decline in the November 12th quarterly release.
Home Depot is expected to bring in $3.03 in EPS on $39.02 billion in revenues, representing year-over-year changes of +7.5% and +12.2%, respectively. Estimates for the period have modestly ticked up in recent days, with the $3.03 estimate up from $3 a month ago.
Same-store sales have been under pressure at Lowe’s as well, with the current Zacks Consensus estimate reflecting a -1.67% decline. This follows the -1.10% decline vs. estimates of a -2.83% decline in the preceding quarter. Lowe’s is expected to bring in $1.82 per share in earnings on $18.29 billion in revenues when it reports results before the market’s open on Wednesday, February 26th. This represents year-over-year changes of +2.8% in EPS and a -1.7% decline in revenues.
With the Fed on track to stay on the easing course, investors would expect treasury yields to come down eventually. That said, the yield curve is unlikely to shift down in parallel, with the shorter end of the curve reflecting the central bank’s easing policy and the longer end proving to be somewhat ‘sticky’ to reflect expectations of a more robust growth environment. The tariffs uncertainty is another risk factor for these operators, both in terms of potential supply-chain disruptions as well as the ability to pass on the resulting higher costs to end consumers.
The read-through for Home Depot and Lowe’s of this interest rate discussion is that mortgage rates may not come down as fast or as much as expected in a Fed easing cycle. This means that trends in the existing home sales space are unlikely to meaningfully improve over the near term, though one would expect the medium- to long-term outlook on the existing home sales front to be positive on economic and demographic grounds.
With respect to the Retail sector’s 2024 Q4 earnings season scorecard, we now have results from 21 of the 33 retailers in the S&P 500 index. Regular readers know that Zacks has a dedicated stand-alone economic sector for the retail space, which is unlike the placement of the space in the Consumer Staples and Consumer Discretionary sectors in the Standard & Poor’s standard industry classification. The Zacks Retail sector includes Home Depot, Lowe’s, other traditional retailers, online vendors and restaurant players.
Total Q4 earnings for these 21 retailers that have reported are up +36.8% from the same period last year on +6.9% higher revenues, with 71.4% beating EPS estimates and an equal proportion beating revenue estimates.
The proportion of these companies beating consensus EPS estimates represents a notable improvement over what we had seen from this group of Retail sector companies in the preceding two quarters but otherwise remains below the average for the preceding 20 quarters. The revenue beats percentage for this group of companies is tracking above other recent periods as well as the historical average.
With respect to the elevated earnings growth rate at this stage, we like to show the group’s performance with and without Amazon, whose results are among the 21 companies that have reported already. As we know, Amazon’s Q4 earnings were up +86.9% on +10.5% higher revenues, beating EPS and revenue expectations.
Most of the earnings growth at this stage for the Retail sector is coming from Amazon, with Q4 earnings for the rest of the group that has reported up only +3% on +5.1% higher revenues. There is decent top-line growth, even on an ex-Amazon basis, which effectively reflects headline inflationary trends in the economy.
Q4 Earnings Season Scorecard
Through Friday, February 21st, we have seen Q4 results from 429 S&P 500 members, or 85.6% of the index’s total membership. Total earnings for these companies are up +12.1% from the same period last year on +5.5% higher revenues, with 77.9% beating EPS estimates and 66.2% beating revenue estimates.
Key Earnings Reports This Week
We have over 750 companies on deck to report results this week, including 54 S&P 500 members. In addition to the aforementioned Home Depot and Lowe’s releases, we have Nvidiaand Salesforce reporting results this week. Dell Technologies, HP, Warner Brothers Discovery, Snowflake, and TJX Companies are other notable companies reporting this week.
The Nvidia release after the market’s close on Wednesday, February 26th, is particularly notable given the company’s leading role in providing chips to the ongoing AI-focused buildout activities. There has been a sentiment change about Nvidia following the DeepSeek announcement, even though many of Mag 7 companies that are Nvidia’s customers appear to be sticking with their capex plans, at least for now. We envision management addressing the DeepSeek issue on the earnings call and providing visibility on the demand outlook.
Nvidia is expected to bring in 84 cents in EPS on $37.7 billion in revenues, representing year-over-year changes of +61.5% and +70.7%, respectively. Estimates have largely remained stable and unchanged, which is a significant downshift from the impressive positive revisions trend that had been in place over the past year. This shift in revisions trend explains the stock’s recent struggles, lagging the Tech sector and the S&P 500 index this year.
The Earnings Big Picture
Excluding the contribution from the Mag 7 companies, Q4 earnings for the rest of the S&P 500 index would be up +9% on +4.5% higher revenues.
For a detailed look at the overall earnings picture, including expectations for the coming periods, please check out our weekly Earnings Trends report >>>> Retail Earnings: A Closer Look
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
