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

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

“Although we expect some slowdown in the near term as segments of the population return to work and spend less time at home, COVID-19 could offer a longer-term benefit for home improvement stocks if it ultimately translates into an increase in home sales, as our survey does.” suggests,” wrote analysts led by Elizabeth Suzuki.

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

As younger homeowners are tackling these projects in older homes, analysts also found that millennials are outperforming other groups.

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

“This could spark a wave of renovation activity from a generation that was relatively slow to enter the housing market,” Bank of America said.

This is one of the reasons Lowe’s Cos. Inc. LOW,
+0.50%
had such a good result in the first quarter, according to analysts. Lowes reported earnings and sales that beat expectations late last month. The majority of Lowe’s customer base, 75% to 80%, are do-it-yourself shoppers compared to competitor Home Depot Inc. HD.
-1.00%
that counts 55% of the DIY community among its customer base, said Bank of America.

“Given Home Depot’s increased reliance on professional clients, we remain neutral on HD as the longer-term impact of high unemployment/recession could slow growth in professionally operated projects,” analysts said. Bank of America rates Lowe’s stock purchase.

Another company benefiting from the trend is Tractor Supply Co. TSCO,
-1.00%
, which is being buoyed by what analysts are calling an “urban exodus” and a shift to “outdoor categories.” Analysts are noting that younger people are more flexible as they are more likely to be new to families and may be looking to move out of their small living spaces where quarantine life is more difficult.

And:According to analysts, Tractor Supply is benefiting from consumer trends such as gardening and moving to rural communities

Tractor Supply shares are up 69% over the past 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 (from $250 to $276) in a note published on June 16. Year-over-year increase in seasonally adjusted spending reported by the US Census Bureau.

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

Instinet also raised price targets for the hardware store.

“We believe both Home Depot and Lowe’s are well positioned in the current environment and beyond as we expect residential retail trends to remain strong for some time to come,” wrote analysts led by Michael Baker.

Instinet rates buy both companies. Home Depot’s price target was raised $10 to $266, and Lowe’s price target was raised to $146 from $130.

Home Depot’s stock is up 34.3% over the past three months, and Lowe’s has skyrocketed 56% over the period.

Other companies are benefiting from the DIY boom. Scotts Miracle-Gro Inc. submachine gun,
+0.14%
announced an upward revision to its guidance for the fiscal year ended Sept. 30, with the company now expecting revenue growth of 16% to 18%. The previous forecast was for growth of 6% to 8%.

“An unprecedented number of consumers planting and tending gardens has resulted in a nearly 40% increase in consumer purchases of Miracle-Gro brand soil and a more than 30% increase in plant food,” said Jim Hagedorn, Chief Executive from Scotts Miracle-Gro. in an opinion.

“We’ve seen a more than 50% increase in purchases of Ortho outdoor pest control products and a nearly 40% increase in indoor products. With the exception of mulch — which is on the rise but still lags behind due to a lack of promotions last year — we’ve seen strong growth in every category this year.” This stock is up 31% over the past three months.

And on Wednesday, Sherwin-Williams Co. SHW,
+1.75%
raised its sales forecast for the second quarter.

“A sharp surge in domestic demand for do-it-yourself (DIY) paint during a period of shelter-in-place initiatives in the second quarter of 2020 is leading to much better than expected sales results in Sherwin-Williams’ Consumer Brands Group and in Americas Group companies,” wrote JPMorgan.

Analysts have a neutral rating on Sherwin Williams stock and have raised their price target to 555 from 520.

Sherwin Williams shares are up 26.2% over the past three months.

The S&P 500 Index SPX,
+0.22%
has increased by 24.1% during this period.

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