Home Depot Or Lowe’s? Morningstar Says One Home-Improvement Stock Looks Cheaper

• Morningstar’s Dave Sekera said Lowe’s offers a more attractive valuation than Home Depot following Q2 results. 
• Home Depot’s Q2 operating margin fell to 14.7%, with Sekera warning that higher mortgage costs and housing pressures could continue weighing on home-improvement spending.   
• Meanwhile, the analyst sees 3% long-term comparable-sales growth and a 13.7% margin. 

Home Depot (HD) and Lowe’s Companies (LOW) are both dealing with a weak housing market, but Morningstar sees a clearer opportunity in one of them. Morningstar Chief U.S. Market Strategist Dave Sekera prefers Lowe’s, saying it looks more attractive at its current price. Home Depot trades above Morningstar’s fair value, while Lowe’s is about 15% below it, leaving more room to rise. 

Lowe’s Attractive Over Home Depot As Valuation Gap Widens

Home-improvement giants Home Depot and Lowe’s are facing a difficult housing backdrop, and following the companies’ fiscal second-quarter (Q2) 2026 results, Sekera said Lowe’s offers the more compelling combination of valuation and longer-term expectations, while Home Depot’s stock remains above Morningstar’s estimate of intrinsic value. 

Home Depot’s Q2 revenue rose 5.7%, helped in part by acquisitions, while sales at existing stores increased 1.7%. Its operating margin fell to 14.7% as higher costs reduced the benefit from tariff refunds. Morningstar kept its $325 fair value estimate unchanged. Sekera said the key concern is what happens after 2026, especially whether higher costs will keep hurting profits or if Home Depot can maintain its profit margins. 

The weak housing market remains a major concern. Sekera pointed to Morningstar research showing that the average monthly mortgage payment for a typical U.S. home has risen by about $1,000 over the past five years. About half of the increase comes from higher borrowing costs, making homeowners less likely to spend on big renovation projects. Home Depot stock inched 0.3% lower in Wednesday’s premarket, while Lowe’s stock rose 0.4%. 

Lowe’s Delivers Revenue But Lacks Balance

Lowe’s Q2 revenue increased 8%, racing past Home Depot’s growth. However, comparable sales gained just 0.2%. High transportation and fuel costs shricked Lowe’s operating margin by 62 basis points, while the company lowered its profit outlook to the lower end of its previous range.

Even so, Morningstar retained its $255 fair value estimate. Sekera expects Lowe’s to eventually produce about 3% annual comparable-sales growth and a 13.7% operating margin, above what the market currently appears to anticipate.

Sekera said both stocks have weakened over the past year, but he views the declines differently. Home Depot still trades above Morningstar’s long-term valuation, while Lowe’s trades at roughly a 15% discount to that estimate. According to Koyfin data, HD trades at a price-to-earnings (P/E) multiple of 21.9, while LOW is trading at 17.1X.

While HD stock declined nearly 2%, LOW stock has dropped 11% year to date. 

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