We upgraded Home Depot and raised our price target. It made the best of a terrible hand

Key Points:

• Home Depot reported strong Q2 results with revenue of $47.86 billion, beating expectations, and EPS of $4.92, surpassing estimates; same-store sales rose 1.7%, nearly doubling forecasts and showing improving momentum throughout the quarter.
• Despite "frozen housing conditions" due to high mortgage rates and bond yields, Home Depot's stock has gained over 17% since May lows, supported by operational improvements like faster delivery and increased focus on professional customers.
• Management highlighted positive comps in 13 of 16 merchandising departments and an 11% increase in sales via digital platforms, driven by investments in an interconnected customer experience and a 45% reduction in delivery lead times.
• Home Depot received $685 million in tariff refunds following a Supreme Court ruling, which helped offset rising cost pressures but muted gross margin improvements; the company reaffirmed its 2026 guidance with modest sales and earnings growth expected.
• CEO Ted Decker is on medical leave with no major updates; meanwhile, CFO Richard McPhail and U.S. stores head Ann-Marie Campbell are managing daily operations, and the board is overseen by lead director Greg Brenneman during Decker's absence.