ISI Group Maintains Buy, $41 Base Case on Home Depot

International Strategy & Investment Group reiterates its Buy rating and $41 base case on Home Depot

after a good third quarter and defensive leverage to lower borrowing costs. According to ISI, “HD grew gross margins, had solid SG&A leverage, traffic growth, ticket growth, raised guidance, had solid buybacks, and inventory reduction. … We expect continued progress toward 2013 productivity and margin guidance, but in terms of the HD/LOW compare - we think the comp gap will narrow in 4Q and 2012. The LOW buyback program could narrow the difference in EPS growth in 2012. SG&A leverage in 2011 was stronger than we had originally modeled, but on light comps we think more of the EBIT margin “heavy lifting” may need to come from gross margin.” HD closed at $38.07 per share on Tuesday.