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June 27, 2020, 9:36 a.m. EDT

Home improvement projects are underway during COVID-19 with millennials spending the most, says Bank of America

This is good news for Lowe’s, Tractor Supply and Sherwin-Williams

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By Tonya Garcia, MarketWatch

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Lowe’s has gotten a boost from the DIY projects that consumers have taken on during the coronavirus pandemic

More people are strapping on their tool belts and getting to work on home improvement projects during the COVID-19 pandemic, with millennials spending the most to get the job done, according to Bank of America.

Bank of America polled 1,054 Americans about their attitudes and shopping habits during coronavirus and found that more than 70% have decided to tackle home improvement projects, with more planned for 2021.

“Although we expect some near-term deceleration as parts of the population go back to their places of business and spend less time at home, COVID-19 could provide a longer-term benefit for home improvement stocks if it ultimately does cause an increase in housing turnover as our survey may suggest,” analysts led by Elizabeth Suzuki wrote.

“A shift into larger existing homes (corresponding to a shift out of cities) and older homes requiring renovation (which most young buyers can more easily afford), could be a multi-year tailwind.”

Since younger homeowners are tackling these projects in older homes, analysts also found that spending from millennials outpaced other groups.

Read: Lowe’s benefited from delayed DIY projects done during coronavirus lockdowns, while Home Depot saw professional jobs put on hold

“This may be kicking off a wave of renovation activity by a generation that has been relatively slow to enter the housing market,” Bank of America said.

This is part of the reason why Lowe’s Cos. Inc. /zigman2/quotes/205563664/composite LOW -4.77%   had such a good first-quarter showing, according to analysts. Lowe’s reported earnings and sales that blew past expectations late last month. The majority of Lowe’s customer base, 75% to 80%, are do-it-yourself shoppers compared with rival Home Depot Inc. /zigman2/quotes/208081807/composite HD -4.13%  , which counts 55% of the DIY community as its customer base, Bank of America said.

“Given Home Depot’s higher reliance on professional customers, we continue to rate HD as neutral, as the longer-term implications of high unemployment/recession could slow growth in professionally-driven projects,” analysts said. Bank of America rates Lowe’s stock buy.

Another company benefiting from the trend is Tractor Supply Co. /zigman2/quotes/202009274/composite TSCO -4.63%  , which is getting a boost from what analysts call an “urban exodus” and a shift to “outdoor categories.” Analysts note that younger people have more flexibility since they’re more likely to not yet have a family, and may be looking to move from their small living spaces where living under quarantine is more difficult.

And: Tractor Supply benefiting from consumer trends like gardening and the move to rural communities, analysts say

Tractor Supply stock has soared 69% over the last three months.

Other research groups are taking note of the increased home improvement activity, with Stifel raising price targets for both Lowe’s (to $156 from $149) and Home Depot (to $276 from $250) in a note published June 16. Analysts highlighted the 16.6% year-over-year increase in seasonally adjusted spending reported by the U.S. Census Bureau.

Stifel rates both Home Depot and Lowe’s stock buy.

Instinet raised price targets for the home improvement retailers as well.

$ 195.54
-9.80 -4.77%
Volume: 5.41M
May 12, 2021 4:03p
P/E Ratio
Dividend Yield
Market Cap
$147.27 billion
Rev. per Employee
$ 317.00
-13.66 -4.13%
Volume: 5.82M
May 12, 2021 4:00p
P/E Ratio
Dividend Yield
Market Cap
$355.53 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 182.41
-8.85 -4.63%
Volume: 1.27M
May 12, 2021 4:00p
P/E Ratio
Dividend Yield
Market Cap
$22.22 billion
Rev. per Employee
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