A boom in home renovations amid the pandemic will drive record sales growth for home improvement chains Home Depot, Lowes, according to Bank of America
Home Depotand Lowe's are tracking to report record second quarter sales growth, according to Bank of America.
- The bank said its own credit-card spending data showed a continued surge in home improvement spending throughout the second quarter.
- The spending boom has in part been driven by the COVID-19 pandemic, as people look to improve their living spaces as they spend more time working or learning at home.
- Due to the strong spending data sourced by Bank of America, the firm raised its second quarter earnings estimates for Home Depot and Lowe's, again.
- Home Depot reports earnings Tuesday morning, while Lowe's reports Wednesday morning.
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That's according to Bank of America, who looked at its own credit-card spending data, among other data sources, to conclude that Home Depot and Lowe's could experience record sales growth when they report earnings later this week.That conclusion led to the bank increasing its second quarter earnings estimates for both Home Depot and Lowe's.
According to the note, BofA has expected a cool down in home improvement sales trends given the recent "extreme strength," but that dip has not come to fruition yet, probably due to pent-up demand in the home improvement space because of COVID-19.Specifically, BofA sees three main reasons for the surge in home improvement spending. First, there had already been pent-up demand for home improvement projects that were put off prior to the COVID-19 pandemic. Therefore, when people spent more time at home and had more time on their hands, they were finally able to tackle delayed projects.
The bank raised its Lowe's price target to $176 from $170, representing potential upside of 14% from Friday's close. For Home Depot, it raised its price target to $290 from $270, representing potential upside of 3% from Friday's close.
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