Citigroup Reiterates Buy Rating on Home Depot (HD)

Citigroup is out with an analyst note this morning where they reiterate their Buy rating on shares of Home Depot Inc.

; the stock has a price target of $43.00. Citi analysts said that they were “encouraged by HD’s results during the first quarter, as well-executed merchandising and supply chain initiatives drove higher in-stock levels, lower markdowns, and gross margin improvement.” They expect HD to continue to realize topline and margin benefits from these initiatives in 2010, and SG&A expenses are expected to grow at ~50% of the rate of sales for the year. They also noted, “HD generated $2.0B of cash flow from operations in the first quarter of 2010, vs. $1.7B in 1Q09, driven by a +41% increase in net earnings and improved inventory management. In 2010, the company has funded $167M in capital expenditures to date, paid $399M in dividends, and repurchased $508M worth of shares.” Citi closed by highlighting the company’s interest rate swap agreement, saying, “In April 2010, HD entered into an additional interest rate swap agreement for $500M, increasing the total notional amount of these agreements to $1.0B. As of May 2, 2010, the fair value was a liability of ~$21M, which is the estimated amount HD would have paid to settle the agreements." "Also in May, HD entered into another forward starting interest rate swap agreement with a notional amount of $500M, to hedge interest rate changes in anticipation of issuing LT debt to refinance debt maturing in 2011.” Learn how to find the best

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