Credit Suisse Positive On Home Depot, Lowe's & Best Buy, Cautious On Staples Ahead Of Q3 Reports

Gary Balter of Credit Suisse previewed The Home Depot, Inc. HD, Lowe's Companies, Inc. L, Staples, Inc. SPLS and Best Buy Co Inc BBY ahead of their earnings report.

Bullish On Home Depot And Lowe's

Based on Balter's store checks and macro data, sales at the two home improvement retailers were in-line with expectations, or better than expected in the third quarter.

However, the analyst notes that both companies will need to provide a "roadmap" on how they can achieve higher margins moving forward given a strong macro support, a continued recovery in housing, low interest rates and increased selling to the Pro customer.

Balter also adds that the two companies can realize further market share gains from closures of Sears stores. The analyst estimates that the closures of some Sears stores could translate to a point annually in same-store sales growth.

Staples: Intriguing Name

Balter notes that shares of Staples have risen over 15 percent in the last three month as investors expect the company to stabilize or slow down a decline in margins, improve its share in delivery and utilize expense savings to offset weakness in Europe.

The analyst does not recommend shares of Staples given the already strong move and investors could see further upside in Office Depot. However, Balter likes owning shares for the long-term and notes that "it remains only a matter of time until the two top players become one."

Best Buy: Potential For Q3 Upside, But Q4 Guidance More Important

Balter believes Best Buy's third quarter has potential for upside given strong demand for the iPhone 6 following its launch and the company's continued initiatives to cut costs.

However, the key focus for the third quarter will be the company's fourth quarter outlook. The analyst is bullish on the company's fourth quarter prospects given the holiday season shopping season featuring new products in mobile, televisions, fitness products and home automation.