Sell-Side Reactions To Home Depot's Q3

Home Depot Inc HD reported beat-and-raise results for its third quarter on strong demand from professional contractors, growth in big-ticket projects and favorable weather.

Argus: Buy, $154 Price Target

Argus maintains its Buy rating and $154 price target on Home Depot, saying the home improvement retailer still has room to increase earnings and profitability.

Moreover, Argus says investor concerns over Home Depot not raising full-year sales forecast are overdone, as the business is solid and gaining market share, with the company stating that its fourth-quarter sales are on plan.

Analyst Christopher Graja has pointed out The National Association of Home Builders Remodeling Index indicates improving conditions, and Harvard University’s Leading Indicator of Remodeling Activity also points to strong growth over the next four quarters.

BMO: Outperform, $148 Price Target

Meanwhile, Wayne Hood of BMO Capital too maintains his Outperform rating on Home Depot shares, but slashed his price target to $148 from $152 to reflect higher costs in the coming years and company’s conservative 2017 SSS outlook against difficult comparisons. The analyst also cut his 2017 EPS estimate to $7.14 from $7.18.

“That said, we see continued GM expansion and expense leverage that gives us confidence management will hit/exceed its 2018 14.5 percent EBIT target,” Hood wrote in a note.

Despite cutting fourth-quarter same-store-sales (SSS) rate to 3.1 percent from 4.3 percent, the analyst is upbeat on monthly third quarter SSS growth trends and fourth quarter sales driving initiatives. Over the long term, the company still expects to reach its goal of $101 billion in sales and a 14.5 percent operating margin.

Citi: Buy

Citi’s Kate McShane is also positive on Home Depot results as she maintains her Buy rating. She noted that Home Depot’s implied fourth-quarter comp growth of about 3.4 percent is not a concern as the housing market metrics “still appear to be able to support further upside and demand in repair & remodeling.”

“We’re still positive despite the market’s increasing concern around the continuing strength of the home improvement market because big ticket (>$900) spending accelerated in Q3 and grew 11.3 percent y/y,” McShane added.

At last check, shares of Home Depot were up 0.86 percent to $125.47.