Home improvement retailers have been relatively stagnant over the last two-plus years, with Home Depot (HD) falling 13% since the end of 2022 and Lowe’s (LOW) stock drifting lower by about 6% in the same time frame.
And analysts aren’t expecting things to materially improve in the immediate future, as Home Depot is expected to increase revenues by only 3% in 2025 and 4% in 2026 while Lowe’s is expected to see revenues drift 4% lower in 2025 before rising by 2% in 2026.
That said, one of the downstream effects of the latest period of high mortgage rates has been what’s often referred to as the “lock-in effect,” where current homeowners simply refuse to sell due to the favorable rates on mortgages originated in the 2020/2021 housing boom times.
But that’s starting to change: Recent analysis finds that the percentage of homeowners locked in by current interest rates has recently declined to multi-year lows, and that’s likely to continue as the Fed commences rate cutting and market rates adjust lower in response.
Of note, the majority of homebuyers (47%) who responded to a Bankrate survey in June indicated that they’d need to see mortgage rates below 5% to feel comfortable buying, so this is likely to be a process rather than an overnight change.
Even so, a thawing housing market with more abundant inventory and more affordable mortgage rates should prompt more spending on the type of home improvement projects that are the bread and butter for companies like Lowe’s and Home Depot.
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So, in anticipation of a more favorable environment for each retailer, let’s take a look at some fundamental metrics of Lowe’s vs. Home Depot and see who comes out on top.
Tale of the Tape: Lowe’s (LOW) vs. Home Depot (HD)
Trailing P/Es: LOW 20.3, HD 24.5
Forward P/Es: LOW 20.8, HD 24.5
2026 earnings growth (anticipated): LOW 7.5%, HD 5.1%
2026 sales growth (anticipated): LOW 2%, HD 4%
Cash per share: LOW $7.69, HD $1.62
Institutional ownership: LOW 77%, HD 72%
Dividend yield: LOW 1.9%, HD 2.5%
As you can see above, Home Depot is the more richly valued of the two names, trading at 24.5 times both trailing and forward earnings. The firm has a long-standing advantage in terms of spending by professionals, which has been an area that Lowe’s has eagerly pursued.
In the most recent earnings (Q2), Lowe’s CEO Marvin Ellison highlighted some improvement there, saying, “The company delivered strong operating performance and improved customer service despite a challenging macroeconomic backdrop, especially for the homeowner. At the same time, we continue to build momentum with our Total Home strategy reflected by our mid-single-digit positive comps with the Pro customer this quarter.”
While professional spend is improving, this is coming on the heels of an unsuccessful multi-year branding initiative “Lowe’s for Pros,” which has since given way to an “MVPs Pro Rewards” program, a tacit acknowledgment that they’re still behind with that sought-after demographic.
So where does that leave us when it comes to Lowe’s vs. Home Depot as the better investment? Over the last year, HD is up 10.1% while LOW is down 5.3%. In the last five years, HD has returned 56.1% compared to a 111.5% gain for LOW.
Lowe’s has been growing faster over the last five years and, with a market cap less than half that of Home Depot, has more room for growth. It also boasts more favorable ratios, which served it well during a sustained period of growing consumer spending and would make it more likely to outperform if consumer spending on home improvement picks back up in the years ahead.
On the other hand, Home Depot’s higher dividend and more entrenched position with pros and contractors would likely make it a better pick should the consumer continue to weaken or should we enter a recession (less splurging on DIY; more stable spending on essential upkeep).
Given the uncertain strength of mid-range consumers and concerns about the labor market, and the possibility that mortgage rates don’t come down as quickly as hoped, I’m inclined to take Home Depot (and its more attractive dividend) for the next few years.
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