The home remodeling market is booming this year, fueled by the desire to transform starter homes into long-term investments, accommodate multi-generational living, and prioritize age-friendly and health-related upgrades. Thus, investors could consider investing in soaring home improvement stocks Lowe's Companies, Inc. (LOW), ADT Inc. (ADT), and JELD-WEN Holding, Inc. (JELD).
The U.S. Personal income rose by $60 billion (0.3% monthly increase), with disposable personal income (income after taxes) increasing by $51.80 billion (0.3%) in December 2023. Additionally, personal consumption expenditures (spending) increased by $133.90 billion (0.7%) in the same month.
For the year 2024, the home improvement market is anticipated to witness $485 billion in spending, reflecting resilience and sustained consumer interest.
Besides, December 2023 saw the number of new homes for sale and sold rise 8% from the prior month, which can be attributed to lower mortgage rates and improved affordability. Sales rose 4.4% year-over-year, according to the seasonally adjusted numbers in the U.S. Census Bureau and the U.S. Department of Housing and Urban Development report. The Northeast led with a 32% monthly sales growth.
This surge in home purchases is likely to generate heightened demand for upgrades as new homeowners seek to personalize their spaces and add value to their investments. In addition, the global residential remodeling market is expected to experience significant demand driven by increased repair activities and changing consumer behaviors favoring additional space and enhanced aesthetics.
The home improvement market is predicted to expand at a CAGR of 6.7% to reach $575.50 billion by 2030.
Furthermore, the global smart home market is growing due to AI integration, widespread smartphone usage, and the adoption of IoT and smart voice recognition technologies. Despite initial disruptions from the pandemic, there's increased demand for smart entertainment products. The global smart home market is expected to grow at a CAGR of 27.1% from 2023 to 2030.
Considering these conducive trends, let’s examine the fundamentals of three Home Improvement & Goods stock picks, beginning with the third choice.
Stock #3: Lowe's Companies, Inc. (LOW)
LOW is a leading U.S. home improvement retailer offering a broad range of construction and renovation products. It caters to both professional customers and homeowners through its stores, website, and mobile apps.
LOW’s trailing-12-month EBIT margin of 12.79% is 68.3% higher than the industry average of 7.60%. Its 8.49% trailing-12-month net income margin is 83.1% higher than the 4.64% industry average.
On January 10, 2024, LOW launched MyLowe's Rewards, a loyalty program for DIY customers offering savings and exclusive perks. Members can use the MyLowe's Rewards Credit Card to save 5% on eligible purchases daily.
The program includes a three-tiered structure with benefits such as points, free gifts, and exclusive offers, expanding nationwide in March.
In the third quarter ended November 3, 2023, LOW generated net sales of $20.47 billion. The company’s operating income and net earnings amounted to $2.70 billion and $1.77 billion, up 191.8% and significantly year-over-year, respectively. Also, its EPS increased significantly from the prior-year quarter to $3.06.
The company projects the fiscal year 2023 outlook with total sales of around $86 billion, an adjusted operating margin of approximately 13.3%, and an adjusted EPS of about $13.
Street expects LOW’s revenue and EPS to be $18.38 billion and $1.68, respectively, for the fourth quarter ending January 2024. The company surpassed the EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 14.8% over the past three months to close the last trading session at $211.98.
LOW’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
LOW has a B grade for Growth and Quality. Within the B-rated Home Improvement & Goods industry, it is ranked #14 out of 57 stocks.
In addition to the POWR Ratings stated above, one can access LOW’s additional Value, Momentum, Stability, and Sentiment ratings here.
Stock #2: ADT Inc. (ADT)
ADT offers security, automation, and smart home solutions to consumers and businesses, providing monitored security systems, fire detection, video surveillance, and access control. The company operates through different segments: Consumer and Small Business; Commercial; and Solar.
ADT’s trailing-12-month EBIT margin of 16.73% is 120.2% higher than the industry average of 7.60%. Its 40.06% trailing-12-month EBITDA margin is 266.5% higher than the 10.93% industry average.
On January 9, 2024, ADT paid a cash dividend of $0.035 per share. The company pays $0.16 annually, which translates to a yield of 2.41% on the prevailing price level. Its four-year average dividend yield is 4.09%. Moreover, the company boasts a five-year record for consecutive years of dividend payments.
During the third quarter, which ended September 30, 2023, ADT’s total revenue stood at $1.24 billion. The company reported an adjusted income per share and EBITDA of $0.08 and $583 million, respectively. Moreover, its adjusted free cash flow rose 2.1% year-over-year to $148 million.
For the fiscal year 2023, the company expects its total revenue to range between $4.95 billion and $5.15 billion. Additionally, its adjusted EBITDA and EPS for the same period are expected to be in the range of $2.35 billion to $2.40 billion and $0.40 to $0.45, respectively.
ADT’s revenue is expected to be $5.70 billion for the fiscal year (ended December 2023). Its EPS for the same fiscal year is expected to grow 51.6% year-over-year to $0.36. The company surpassed the EPS estimates in three of the trailing four quarters.
ADT’s shares have gained 13.5% over the past three months to close the last trading session at $6.63.
ADT’s POWR Ratings reflect its positive prospects. The stock has an overall B grade, which translates to Buy in our proprietary rating system.
ADT has a B grade for Sentiment and Quality. Within the same industry, it is ranked #12.
To see ADT’s additional POWR Ratings for Growth, Value, Momentum, and Stability, click here.
Stock #1: JELD-WEN Holding, Inc. (JELD)
JELD specializes in designing, manufacturing, and selling doors and windows. The company offers a diverse range of residential and non-residential door products, along with windows and ancillary items.
JELD’s trailing-12-month asset turnover ratio of 1.52x is 87.9% higher than the industry average of 0.81x. Its 2.81 trailing-12-month cash per share is 32% higher than the 2.13 industry average.
In the third quarter, which ended September 30, 2023, JELD reported net revenues of $1.08 billion. The company's adjusted net income and net income per share from continuing operations grew 43.4% and 43.2% from the prior-year quarter to $45.60 million and $0.53, respectively. Additionally, its adjusted EBITDA from continuing operations rose 11.9% year-over-year to $ 105.70 million.
The company expects net revenue in the range of $4.25 billion to $4.35 billion for the fiscal year (ended December 2023). Also, adjusted EBITDA from continuing operations for the same fiscal year is expected to be within the range of $365 million to $375 million.
Analysts expect JELD’s revenue and EPS to be $4.37 billion and $1.55, respectively, for the fiscal year. The company surpassed the revenue and EPS estimates in each of the trailing four quarters.
The stock has gained 63.9% over the past three months to close the last trading session at $18.39. It gained marginally intraday.
JELD’s optimistic fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
JELD has an A grade for Value and Momentum. Within the same industry, it is ranked #11.
Click here for JELD’s additional Growth, Stability, Sentiment, and Quality ratings.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
LOW shares were trading at $210.07 per share on Monday afternoon, down $1.91 (-0.90%). Year-to-date, LOW has declined -5.13%, versus a 2.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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