The COVID-19-induced shelter-at-home orders fuelled the need for home improvement by housebound Americans, thereby driving demand for the said industry.

The home improvement space includes Décor and indoor garden, Painting and wallpaper, Tools and hardware, Building materials, Lighting et al.  Apart from essentials, retailers in this industry are witnessing solid demand for gardening and other in-house activity-related products.

Although states are reopening and people are reporting back to work, the emergence of new cases triggers the fear of a second wave, only to remind us that the deadly virus is not going to subside anytime soon. Rather, the pandemic threat keep people confined to their homes, spurring the obvious requirement for home improvement products.

One of the leading industry players, management at Lowes disclosed that it saw very strong COVID-related demand for cleaning products along with other necessary home appliances, such as refrigerators, freezers and DIY home repair products. As customers remained in home isolation during the first quarter, they got engaged in a variety of projects that drove double-digit comps in core spring-related categories apart from paint and other critical repair plus maintenance categories.

Also tighter budgets due to the overall economic misery taught Americans to get more bang for their buck. This frugal mindset with a deepened focus on value for money also spawned a plethora of DIY home improvement projects among homeowners.

Further, social trends are contributing to a booming home improvement industry. For baby boomers, home improvement is appealing because it allows them to “age-in-place.” With relative minor investments, home improvement programs can readily accommodate lifestyle changes.

In the first quarter, the industry saw an upsurge in DIY products, partly driven by the arrival of spring in many western and southern geographies as well as the home-centric customer psychology. Companies saw broad-based activities, ranging from outdoor landscaping and other beautification projects to essential indoor repair and maintenance work plus long-overdue home endeavors. These were included in the customers’ things-to-do list that they previously neglected given their busy schedules earlier.

Demographic mix is another key driver for the industry. Apart from the grey populace, who are embracing home improvements, another cohort, consisting of the millennials, are boosting the current home improvement trends. Millennials now represent the largest generation with many touching their 30s. Better part of these millennials with decent incomes are purchasing homes and investing in home improvement furnishings. Many also see home improvement as a vehicle of creativity and self-expression.

Another most salient technological factor in the home improvement industry is online sales growth, which allowed customers to continue with their purchases smoothly without facing the need to venture out.  For firms in the home improvement industry, a strong online presence ensuring quality of service is a priority for the foreseeable future.

Per a Global Market Insights report, the global home improvement market  was valued at more than $800 billion in 2018 and is anticipated to witness a CAGR beyond 4.5% up to 2025, scaling its worth to $1.12 trillion.

Stocks on Investors’ Radar

Below we mention three stocks with a strong earnings growth rate and an upward earnings estimate revision.

Lowes Companies, Inc. LOW remains well positioned to capitalize on demand for the home improvement market, backed by investments in technology, merchandise category and strength in Pro business. The company gains traction from retail fundamentals strategy, robust execution and resilience in home improvement business model aided performance. Also, it benefits from an ability to cater to the spike in online demand amid the prevalent pandemic chaos.

The stock currently carries a Zacks Rank #2 (Buy) and has witnessed a 2.5% upward revision in 2020 earnings estimate over the past 30 days. Its current-quarter earnings growth rate of 15.81% is higher than the industry’s growth of 0.91%.

The Home Depot Inc. HD benefited from its strong interconnected presence, which helped it adapt to changing customer preferences during the coronavirus outbreak in late March. The company quickly got acclimatized to consumer needs, providing contactless curbside pickup and other fulfillment services, adhering to safety protocols. This in turn, bumped up the comps performance across stores.

The stock presently carries a Zacks Rank #3 (Hold) and has witnessed a 1.1% northward  revision in 2020 earnings estimate over the past 30 days.  Its current-quarter earnings growth rate of 1.89% beats its industry’s growth of 0.91%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Scotts Miracle-Gro Company SMG, the world’s leading marketer of branded consumer lawn and garden as well as indoor and hydroponic growing products, recently raised its full-year guidance, led by a spurt in consumer purchases.  The company is experiencing healthy demand from the gardening season even after the normal historical time frame. An unprecedented number of consumers planting and preserving gardens pushed up demand for the company’s products.

The stock sports a Zacks Rank #1 (Strong Buy) at present and has witnessed a 10.8% upward revision in 2020 earnings estimate over the past 30 days. Its current quarter’s earnings growth rate of 7.72% is against the industry’s decline of 6.15%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>
 

 

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