Back to top

Analyst Blog

Boosted by the recent rebound in the U.S. housing market, shares of The Home Depot Inc. (HD - Analyst Report) hit a new 52-week high of $71.57 yesterday, before closing at $71.20. This Zacks Rank #3 (Hold) home improvement retailer beat its previous 52-week high of $71.45 and has generated a year-to-date return of approximately 12.8%.

Average volume of shares traded over the last 3 months came in at approximately 6,772K. Currently, the stock trades at a forward P/E of 20.3x, flat to its peer group.

Home Depot is a leading player in the highly-fragmented home improvement industry. The company has been revamping itself by concentrating on square footage growth and maximization of productivity from its existing store base.

In addition, the company has implemented significant changes to its store operations to make them simpler and more customer-friendly. We believe these initiatives will induce more traffic to its stores while boosting its top line.

Home depot has always maintained a disciplined capital allocation strategy, focused on making investments to develop its business, while using the excess cash to enhance shareholder returns via paying dividends and share buybacks. Since 1987, the company has increased its dividend from 0.06 cents to 39 cents. Additionally, the company targets to grow return on invested capital to 24% by the close of 2015.

The company also boasts of an impressive record of beating the quarterly earnings expectations and favorable outlook.

With respect to earnings surprise, Home Depot has beaten the Zacks Consensus Estimate 19 times in the last 20 quarters with an average surprise of 12.2%. In the last reported, i.e. for the fourth quarter of fiscal 2012, the company’s earnings beat the Zacks Consensus Estimate by 4.7%.

The company’s adjusted earnings of 67 cents per share jumped approximately 34.0% from the year-ago quarter’s earnings of 50 cents and beat the Zacks Consensus Estimate of 64 cents. The increased bottom line was aided by strong sales growth and improved operating performance.

Buoyed by better-than-expected results, Home Depot projected fiscal 2013 earnings to grow by nearly 12% to $3.37 per share and total sales to increase by 2.0% year over year, with comparable store sales expected to rise nearly 3.0%.

Besides Home Depot, companies such as V.F. Corp. (VFC - Analyst Report), The Walt Disney Company (DIS - Analyst Report) and Time Warner Inc. (TWX - Analyst Report) achieved new 52-week highs of $170.56, $59.24 and $59.09, respectively, yesterday.

Please login to Zacks.com or register to post a comment.