Home Depot to Post Q2 Earnings: Is it Wise to Buy Before the Release?

The Atlanta, GA-based leading home improvement retailer delivered a trailing four-quarter average earnings surprise of 1.6%. In the last reported quarter, the company delivered a positive earnings surprise of 0.9%.

HD’s Q2 Earnings Whispers

Our proven model conclusively predicts an earnings beat for Home Depot this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Home Depot has an Earnings ESP of +1.35% and a Zacks Rank #3 at present.

Trends to Monitor Before HD’s Q2 Earnings

Home Depot’s fiscal second-quarter results will likely hinge on spring demand, weather, Pro momentum, housing-market pressures and gross-margin trends, with several company-specific initiatives offering potential upside. Management entered second-quarter fiscal 2026, encouraged by customer engagement, noting that favorable weather in early May restored spring-project activity to levels seen in February and March. With some of the company’s largest selling weeks falling in the fiscal second quarter, categories such as live goods, patio, grills and outdoor power equipment should support sales.

Another positive is continued progress under the “One Home Depot” interconnected strategy. Digital sales rose more than 10% in the fiscal first quarter, marking the fourth consecutive quarter of double-digit growth, helped by faster delivery, better search and recommendations, and improved fulfillment. Management also cited lower cancellations, faster fulfillment and stronger customer satisfaction, suggesting these investments are translating into greater engagement. These trends are expected to have boosted the company’s sales in the to-be-reported quarter.

Second-quarter fiscal 2026 performance is also expected to have gained from contributions from the GMS acquisition and expansion of the SRS business, which continue to support the company’s Pro ecosystem and market-share growth initiatives.

The expanding Pro ecosystem is another key upside driver. Home Depot is integrating SRS, GMS, HD Supply and Construction Resources while expanding trade credit, jobsite delivery, digital tools and cross-selling. Management expects roughly a $400-million cross-sell run rate this year, with an ambition to double that next year, while complex Pro purchases continue to outgrow overall Pro sales. These benefits are expected to have boosted the performance in the fiscal second quarter.

However, underlying demand remains constrained by elevated mortgage rates, weak housing turnover and consumer uncertainty, which continue to pressure larger discretionary remodeling projects. Margins will be another key focus. On its last reported quarter’s earnings call, management expected year-over-year gross-margin pressure to continue in the fiscal second quarter, although at a smaller magnitude than the first quarter’s 75-basis-point decline, largely reflecting the GMS acquisition and SRS pricing investments. Higher fuel, commodity and tariff-related costs are likely to have added pressure.

Our model predicts a gross margin of 32.8% for the fiscal second quarter, contracting 60 bps year over year. We expect adjusted operating income to decline 0.2% in the fiscal second quarter, with a 70-bps fall in the operating margin to 14.1%.

HD’s Price Performance & Valuation

Home Depot’s shares have gained 14.9% in the past three months compared with the industry’s 12.2% growth. The stock also outpaced the S&P 500 and the Retail-Wholesale sector’s growth of 3.2% and 0.8%, respectively, in the same period.

HD’s 3-Month Stock Performance

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Home Depot’s current valuation appears quite pricey. The company trades at a forward 12-month P/E multiple of 21.83X, exceeding the industry average of 19.9X.

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Other Stocks With the Favorable Combination

Here are some other companies, which, according to our model, also have the right combination of elements to beat on earnings this reporting cycle.

Target Corporation TGT currently has an Earnings ESP of +7.57% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2026 numbers. The consensus mark for revenues is pegged at $26.1 billion, which indicates a rise of 3.4% from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for TGT’s quarterly earnings per share of $2.25 implies growth of 9.8% from the year-ago quarter’s actual. The consensus mark has moved up 1.8% in the past seven days. TGT has a trailing four-quarter negative earnings surprise of 8.2%, on average.

Ross Stores Inc. ROST currently has an Earnings ESP of +6.61% and a Zacks Rank #2. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2026 numbers. The consensus mark for revenues is pegged at $6.12 billion, which indicates growth of 10.7% from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for Ross Stores’ quarterly earnings per share of $1.92 implies a rise of 23.1% from the year-ago quarter’s actual. The consensus mark has moved up 1.1% in the past 30 days. ROST has a trailing four-quarter earnings surprise of 10.2%, on average.

Five Below Inc. FIVE currently has an Earnings ESP of +6.67% and a Zacks Rank #3. The company is likely to register growth in the top and bottom lines when it reports second-quarter fiscal 2026 numbers. The Zacks Consensus Estimate for FIVE’s quarterly EPS is pegged at $1.28, suggesting 58% growth from the year-ago period’s actual. The consensus mark has moved up 3.2% in the past 30 days.

The consensus estimate for FIVE’s quarterly revenues is pegged at $1.2 billion, which implies growth of 17.9% from the prior-year quarter’s actual. Five Below has a trailing four-quarter earnings surprise of 70.1%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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