Home improvement retailers Home Depot (HD) and Lowe's (LOW) are scheduled to report results of their third quarter before the market open on Tuesday, November 16, and Wednesday, November 17, respectively. Home Depot's conference call is scheduled for 9:00 am EDT on Tuesday and Lowe's will hold its quarterly call on Wednesday at 9:00 am EDT. What to watch for:

1. HOUSING MARKET COMMENTARY: Strong consumer demand helped push builder confidence higher in October despite growing affordability challenges stemming from rising material prices and shortages. Builder sentiment in the market for newly built single-family homes moved four points higher to 80 in October, according to the NAHB/Wells Fargo Housing Market Index released on October 18. “Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building materialand home prices,” said NAHB Chairman Chuck Fowke.

2. SUPPLY CHAIN ISSUES: Loop Capital analyst Laura Champine downgraded Home Depot and Lowe's to Hold from Buy with a price target of $325, down from $370, and a price target of $220, respectively, as part of a broader deep-drive research into home centers. Supply chain issues represent a "significant risk" in the sector and "persistent" inflation may push the Fed toward an interest rate hike within her 12-month time horizon, the analyst tells investors in a research note. While the larger names should manage these headwinds better than most given their scale and quality management, the environment is "more fraught with risk," Champine added.

Champine said that her estimates for Home Depot had been "too aggressive" given the challenges the company is facing in maintaining in-stock positions in key categories.

3. RISK/REWARD LOOKS LESS COMPELLING: Wells Fargo analyst Zachary Fadem raised the firm's price target on Lowe's to $260 from $230 and raised the firm's price target on Home Depot to $400 from $365 and keeps an Overweight rating on the shares. While Q3 risk/reward looks less compelling following the +17% move for the stock, the analyst believes exposure to home improvement remains warranted, with relative benefits versus broader retail, likely upward revisions, and long-term housing and demand tailwinds intact.

4. SAME-DAY DELIVERY EXPANSION: In October, Home Depot said it will offer same-day and next-day delivery with Walmart (WMT) GoLocal in select markets, with plans to expand to multiple markets across the country by the end of the year. Products that qualify for this scheduled delivery, including tools, fasteners, paint, and other supplies that easily fit in a car, will have that option enabled at online checkout, the companies said.

5. LOWE'S GUIDANCE: In August, Lowe's forecast fiscal 2021 revenue of $92B and SSS up 30%. Analysts currently expect Lowe's to report FY21 revenue of $94.97B. At the time, the company commented that "Our strong results this quarter demonstrate that our Total Home strategy is working."