Analyst: Home Depot Inc. Outlook May Prove Low

Home Depot Inc. HD might add to its current share buyback plan while its guidance for 2015 earnings looks conservative, an analyst said Wednesday. The Atlanta-based retailer gained sharply on Tuesday after beating fourth-quarter expectations and forecasting full-year earnings of $5.11 to $5.17 a share, on sales growth of 3.5 to 4.7 percent. In early trading Wednesday, Home Depot changed hands at $116.87, little changed. "The guidance seems low," according to Jeffries Daniel Binder, who boosted his price target nearly 4 percent Wednesday to $135 a share, and maintained a Buy rating. Home Depot also unveiled an $18 billion buyback program Tuesday, in place of a $17 billion plan launched in 2013. If the company's financial plans pan out, Binder said the buyback target may also prove low. The company is forecasting higher spending on information technology in the wake of last years data breach when credit card data for 56 million customers were stolen by hackers. But faster growth in expense may get offset by increasing sales in high-margin e-commerce, and the company is forecasting a flat gross margin. Binder, however, sees potential margin growth through additional efficiencies in the company's supply chain and merchandizing, as well as lower losses to shoplifting, or "shrink." Despite shipment delays of up to two weeks, Home Depot has been so far unaffected by operational woes at West Coast seaports, Binder said. Rather, the first quarter should prove to have the highest rate of growth in same store sales for all of 2015, according to Binder. Among analysts following Home Depot, 17 maintain Buy ratings while 13 are at Hold, according to FactSet. The average Wall Street price target is $112.36.