Nov 14 (Reuters) – Dwelling Depot Inc (HD.N) and Lowe’s Cos Inc (LOW.N) are prone to report rising gross sales within the third quarter as Individuals proceed to spend on residence enhancements in distinction to different retailers dealing with declining discretionary spending because of surging costs.

Wall Avenue analysts see the biggest U.S. residence enchancment chains benefiting as rising rates of interest encourage residence house owners to renovate present properties moderately than transfer on, whereas skilled contractors have a backlog of labor to clear.

“Whereas the prevailing narrative would recommend in any other case, the sky isn’t but falling throughout housing retail,” Wells Fargo analyst Zachary Fadem stated in a observe.

THE CONTEXT

Dwelling enchancment chains noticed gross sales and income surge through the pandemic as Individuals hunkered down at residence revamped their residing areas.

Whereas demand is predicted to chill, larger mortgage charges and residential costs are offering a brand new motive for households to transform their present properties.

“Dwelling Depot and Lowe’s now not have the extra captive shopper base that they had all through 2020. But shoppers very a lot proceed to spend on the house,” stated MKM Companions analyst David Bellinger.

Paint and coatings maker Sherwin-Williams Co (SHW.N) stated final month that skilled contractors nonetheless had backlogs that might take them via the top of the yr and even longer.

“The ageing residence continues to require extra reworking, extra updates, individuals ageing in place, and we see that,” Sherwin-Williams Chief Govt John Morikis stated.

THE FUNDAMENTALS

** Dwelling Depot is predicted to report Q3 income of $37.96 billion, up greater than 3% from final yr, whereas Lowe’s is estimated to indicate an increase of about 1% to $23.13 billion

** Analysts count on Dwelling Depot to put up a revenue of $4.12 per share, whereas Lowe’s is predicted to report earnings of $3.10 per share

WALL STREET SENTIMENT

** Dwelling Depot is rated “purchase” on common amongst 36 brokerages; Lowe’s has a consensus ranking of “purchase” amongst 33 analysts

** The median value goal for Dwelling Depot is $345.50, whereas that of Lowe’s is $235

** Dwelling Depot shares have shed about 24% YTD, with Lowe’s down over 19%, owing to worries of a requirement slowdown

Reporting by Deborah Sophia in Bengaluru; Modifying by Sriraj Kalluvila

Our Requirements: The Thomson Reuters Belief Rules.