01:41 PM EDT, 05/10/2024 (MT Newswires) -- Home Depot ( HD ) and Lowe's (LOW) likely face "subdued" expectations for their upcoming financial results amid continued macro headwinds for the home improvement retail sector, Oppenheimer said Friday.

Home Depot ( HD ) is scheduled to report its fiscal first-quarter results Tuesday, while Lowe's will report May 21. Oppenheimer expects Home Depot ( HD ) to report earnings of $3.49 a share and a comparable-store sales decline of 3.5%. Wall Street is looking for $3.60 and a 2.2% fall, respectively, the brokerage said in a note. Lowe's EPS is pegged at $2.94, with comparable-store sales seen dropping 6.5%, versus the Street's expectations for EPS of $2.95 and comparable sales down 5.7%, according to the note.

"Consumer demand trends within home improvement retail remain challenged and are likely to stay sluggish, at least through 2024, owing to ongoing post-pandemic dislocations, weaker underlying confidence, and historically subdued housing activity, aggravated by elevated rates," Oppenheimer analysts Brian Nagel, William Dossett and Andrew Chasanoff said. "Our conversations with clients suggest that investors remain too optimistic towards prospects for a near-term re-strengthening in demand within home improvement retail."

The brokerage said its analysis points to "few, if any, clear signals" of improvement in demand at both companies. Another round of weak quarterly data points from the retailers is expected to "undermine further the waning, but still optimistic, nearer-term sentiment, embedded within shares," the trio wrote.

Home Depot's ( HD ) full-year outlook calls for comparable-store sales to fall 1%, while Lowe's indicates a 2%-to-3% drop, which Oppenheimer said are likely "subdued, but not necessarily reflective of a worst-case scenario."

The brokerage reiterated its shorter-term perform ratings on the shares of both Home Depot ( HD ) and Lowe's, with its respective price targets of $345 and $230. "We continue to recommend intermediate- to longer-term-focused investors remain on the sidelines, awaiting better entry points in shares of (Home Depot ( HD )) and (Lowe's)," the analysts said.

The Federal Reserve tightened monetary policy by 525 basis points from March 2022 through July 2023 to combat inflation. It has kept its benchmark lending rate unchanged since then, with its latest pause coming last week.

"We are increasingly concerned that a still-large contingent of investors expecting rate cuts to amount to a significant near-term 'unlock' for demand in home improvement could prove disappointed, upon a slower-than-anticipated pace of moderation and/or delayed positive effects of waning lending costs, given underlying, already historically subdued, fixed borrowing costs," the Oppenheimer analysts said.

Price: 345.32, Change: -2.12, Percent Change: -0.61