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Citigroup Raises Home Depot Price Target Following Earnings

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In a note out Wednesday, Citigroup analyst Kate McShane maintained a Buy Rating on Home Depot Inc (NYSE: HD), while upping the price target to $133.

McShane feels that buyback flexibility should provide support to EPS target, while the company's EPS guidance is conservative given buyback assumptions.

The $4.5 billion buyback assumption for 2015 is below the $7 billion repurchased in 2014. Citigroup is modeling 2015 buybacks of $7 billion, which adds an incremental ~$0.05 to its EPS estimate of $5.26 (or $0.09 above high end of Home Depot's guidance).

Home Depot officials noted that, "if foreign currency exchange rates remain where they are today, this would cause a negative impact to fiscal 2015 net sales growth of ~$1 billion." The negative impact would drop year-over-year growth to the low end of sales growth and comp guidance (sales growth of 3.5 percent, comp of 3.3 percent, EPS of $5.11).

"We are raising our target price to $133, which equates to 22x our FY17 EPS estimate. Over the past three years, HD has traded at a forward multiple ranging from 16x to 25x and averaging around 20x. We think HD deserves to trade at a premium based on upside from the likelihood of greater than guided return of capital and a likely conservative benefit from U.S. housing."

The new $133 target implies 134.91 percent upside from Tuesday's $116.75 closing price for Home Depot.

Latest Ratings for HD

Mar 2018Loop CapitalInitiates Coverage OnHold
Feb 2018BMO CapitalMaintainsOutperformOutperform
Feb 2018CitigroupMaintainsBuyBuy

View More Analyst Ratings for HD
View the Latest Analyst Ratings

Posted-In: Citigroup Kate McShaneAnalyst Color Price Target Analyst Ratings


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