Source: Wikimedia Commons, courtesy WestPortWiki.

Among the stocks most connected to the health of the housing industry, Home Depot (NYSE:HD) has been one of the most successful at navigating the crosscurrents of the U.S. economy in recent years. Even as housing was slow to recover from the 2008 recession, Home Depot found ways to cater to customers seeking to make the most of their current homes. As home sales picked up, Home Depot successfully shifted gears and catered both to its traditional do-it-yourself homeowner customers and to its increasingly important base of professional contractors. Coming off a stellar performance in 2014, in which the stock produced total returns of more than 30%, Home Depot has investors wondering whether the home-improvement giant can produce similar success in 2015. Let's take a closer look at Home Depot and what you should look out for this year.

Stats on Home Depot

Average stock target price


Full-year fiscal 2014 EPS estimate


Full-year fiscal 2015 EPS estimate


Full-year fiscal 2014 sales growth estimate


Full-year fiscal 2015 sales growth estimate


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Source: Yahoo! Finance.

The big challenges for Home Depot in 2015
As you can see above, professional investors don't have a lot of confidence in Home Depot's upside, with target prices just 3% higher than the current price of the shares. That's similar to what investors in rival Lowe's (NYSE:LOW) expect, with Lowe's stock price currently within $2 to $3 of their average target price. After such strong performance in 2014, Home Depot has many analysts wanting to see follow-through on its strategic plans before getting more optimistic about the stock.

Source: Home Depot.

Despite the uncertainty among Wall Street pros, Home Depot has a lot going for it. Home prices have continued to rise, and better economic conditions have left homebuyers in a better position to afford housing than in past years. Low interest rates have lasted a lot longer than most economists expected, and the recent plunge in energy prices will put more money in homeowners' pockets, boosting disposable income and opening up the possibility of taking on even more home-related projects this year.

Yet the big question that Home Depot faces is whether it can continued to squeeze even more profits from its revenue growth. The home-improvement giant isn't likely to produce sales growth of more than 4% to 5% in 2015, but investors want to see continued earnings gains that are closer to 20%. To accomplish this, Home Depot will have to keep moving forward with initiatives like streamlining its e-commerce portal to maximize customer engagement and increase store traffic.

Another potential obstacle to Home Depot's growth is its failure to establish a strong international presence. Moves to build up its footprint in Canada and Mexico have been reasonably successful, but Home Depot still gets almost 90% of its total revenue from its U.S. market. In particular, negative experiences with its attempts to enter the potentially lucrative Chinese market forced Home Depot to retrench, and it also appeared to call into question just how well the concept will translate to other cultures across the globe.

Source: Home Depot.

Finally, the big elephant in the room for Home Depot is its breach of customer data. With many year-end retrospectives focusing on the company's victimization as part of a larger trend toward greater hacking activity, Home Depot will likely have to deal with the damages caused by the attack throughout 2015. Yet in some ways, the prevalence of hacker attacks across the retail universe will serve to keep customers from singling out Home Depot, instead supporting the notion that dealing with data theft is simply a cost of doing business in the retail world. Once the New Year pushes those issues back into the background, Home Depot should be able to contain and manage its exposure in a way that leaves its customers undeterred in doing business at its stores.

For Home Depot to keep delivering outsized returns in 2015, the company will need to keep executing flawlessly to take advantage of rising demand for its products and services. By giving customers of all skill levels the exact help they need to succeed with their home-improvement goals, Home Depot could make itself the stand-out stock in the industry and further cement its leadership position in home-related retail.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.