Yesterday, Home Depot reported its results for both the fourth quarter and fiscal year 2024.
On paper, these earnings will bode very well for Home Depot investors. For the fourth quarter, earnings per share and revenue both outpaced what many analysts were expecting.
Crucially, comparable sales for Home Depot increased 0.8% in the fourth quarter. This marks the conclusion of an eight-quarter losing streak for comparable sales.
Home Depot’s good news comes at an extremely crucial point for the homebuilding and home improvement industry. Economic uncertainty and troubles in the housing market have fostered greater concerns for where consumer demand stands.
That being said, Home Depot’s leadership team seems to be keeping these worries in mind. Looking ahead to fiscal year 2025, Home Depot is anticipating total sales growth to increase by approximately 2.8%. Meanwhile, the company is projecting that adjusted diluted earnings-per-share will decline about 2% from FY2024’s numbers.
Home Depot’s outlook should not come as a particular shock. Recently, the Federal Housing Finance Agency’s house price index reached an all-time high in December. A higher HPI can very well create a more unwelcome environment for potential homebuyers.
See More: FHFA House Price Index Up 0.4% in December
All in all, this report creates an interesting quandary for Home Depot investors. The company’s near-term results encourage future engagement, but the year’s housing troubles may contribute to volatility down the line.
Opportunity to Diversify
Moments like this call for a more holistic approach to investing. For instance, investors may wish to gain exposure to Home Depot through a more diversified ETF. By doing so, one could participate in Home Depot rallies while limiting vulnerability to the housing market.
As a good example, take a close look at the Vanguard Consumer Discretionary ETF (VCR ). VCR’s strategy provides diversified exposure to a number of different companies across the consumer discretionary field.
Home Depot remains a top 3 holding within VCR’s portfolio. However, as of January 31st, 2025, over 40% of the fund’s net assets lie in Amazon and Tesla stock. After Home Depot’s 6% weight, the remainder of stocks in the fund’s portfolio remain in the 1-2% range.
Naturally, Amazon and Tesla offer a relatively low correlation to the housing market. As such, the fund can be in a good position to perform well, even if the housing market experiences troubles during the year.
That being said, the remainder of VCR’s portfolio is just as important to consider. The 6% weight in Home Depot stock lets the fund capitalize on the company’s momentum.
Meanwhile, over 50% of VCR’s net assets lie in a broad mix of other consumer discretionary giants. This includes names like Nike, Starbucks, and McDonald’s, among many others. This wide selection of household names gives the fund a stable ballast in case any of these companies experiences some market turmoil.
VCR’s distinct strategy has paid off with compelling results. As of January 31st, 2025, the fund’s NAV has jumped over 34% over the last twelve months.
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