More upside for Home Depot and Lowe’s as homeowners tap equity for remodels – analyst

Homeowners are increasingly leveraging home equity to fund repair and remodeling (R&R) projects, with Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) emerging as key beneficiaries—capturing nearly a quarter of the $1 trillion R&R market.

The trend towards big-ticket projects and outlook for the two leaders in the sector led Jefferies’ Jonathan Matuszewski to reiterate his Buy rating on Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) and raise calendar year 2026 and 2027 EPS estimates above the street consensus.

After COVID, big-ticket projects were undermined by a shift in spending on services, higher financing rates, and anemic housing turnover. In particular, high interest rests kept Home Equity Line of Credit (HELOC) withdrawals less than a third of pre-COVID levels.

However, first quarter data shows homeowners withdrawing nearly $25B in equity, up 22% from last year, marking the second largest second-lien equity withdrawal volume since 2008, with bathroom remodels and door and window replacements the top projects.

Industry data suggests ~3% growth in R&R the years ahead, though Matuszewski puts that figure closer to 4% growth given HELOC momentum and as 48M mortgage holders “who have some level of tappable equity become less fixated on artificially low HELOC rates from 24+ months ago and monetize home equity gains.”

Historical data mirroring similar spending trends on R&R showed comparable sales for both Home Depot (NYSE:HD) and Lowe’s (NYSE:LOW) accelerating to up mid-single-digits to low-double digits percentage and P/E multiples increasing by 5–9 turns.

“Bottom line, we believe the Street’s current view of EPS for the next 24–36 months is too low,” Matuszewski says, with Home Depot (HD) expected to see EPS average ~4% above consensus estimate ~5% for Lowe’s (LOW) over the next 12 months.

Jefferies now sets a price target for Home Depot (HD) at $460 from $456 and Lowe’s (LOW) at $280 from $275.

Home Depot (HD) will report second quarter results before the market open on August 19, expected to show a non-GAAP profit of $4.71 per share on $45.44B in revenue.

Lowe’s (LOW) reports before the open on August 20, expected to show a non-GAAP profit of $4.26 per share on $24B in sales.