Street Cheers Home Depot's Latest Quarter

Wall Street analysts were gleeful after Home Depot Inc HD beat earnings and revenue consensus for the fourth quarter. The company earned $1.17 per share on sales of $20.98 billion while the Street was expecting $1.10 on $20.39 billion in revenue.

'High-Quality Way To Play Housing Recovery'

Deutsche Bank's Mike Baker gave Home Depot a Buy rating and a price target of $135. Baker noted "incremental takeaways" that justified his rating. A prominent example was that individual receipts over $900 were up nearly 12 percent in the fourth quarter, led by spending in appliances, roofing and specialty kitchens. However, spending was still below housing-bubble levels.

Baker also believes the home improvement retailer issued conservative guidance that does not take into account Home Depot gaining market share, which he argues it is.

"Not only is HD taking share, but they are doing so at an accelerating pace," Baker wrote. "For instance, their 7.1 percent reported comp this quarter was 270 bps better than the 4.4 percent industry growth."

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Baker raised his 2016 and 2017 revenue estimates from $6.16 and $6.96 to $6.24 and $7.07, noting that weakness in the housing market was Home Depot's biggest risk.

Jefferies analyst Daniel Binder offered a Buy rating and $140 price target. He wrote that, "Home Depot is a high-quality way to play the recovery in housing and remodel spending."

Binder expressed confidence in Home Depot management, which he called "one of the higher-quality teams in retail." He also noted that home improvement retail is "highly shielded" from online competition.

Binder expects earnings of $5.40 for 2016 and $6.13 for 2017.

Some Analysts Less Enthusiastic

Argus, in a note discussing Lowe's Companies, Inc. LOW noted that, combined, the two companies take up 20 percent of the retail home improvement market. They both face threats from higher interest rates or any other factors that would affect the housing market, the firm wrote.

SunTrust's Keith Hughes wrote that there were "no signs of slowdown" for Home Depot, but offered a Neutral rating.