HD May Accelerate Share Buyback Activity by Mid-2010
Christopher Horvers of JP Morgan maintained his “overweight” rating on The Home Depot (NYSE: HD). The target price is set to $31.
HD reported Q3 operating EPS at $0.41, comfortably beating the estimates and the consensus. The decline in HD’s sales at 8.0% was in-line with the estimates. HD’s gross margins have improved, driven by improved merchandising and lower shrink. While HD’s US comps were better than that of LOW’s, the gap has narrowed sequentially.
According to JP Morgan, the Home Depot’s implied guidance for Q4 indicated a deceleration in the sales trend and disappointing margins. JP Morgan believes that HD’s traffic trends will remain stable to flat and there is potential for ticket comps during the mid of 2010. JP Morgan expects HD to have cash balance of $2.3 billion at the end of 2009, which may prompt to accelerate share buyback activity by the mid of 2010.
