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Home Depot's shares will reach $123 by 11.02.2015
4 october 2015

We are still upbeat about the shares of Home Depot (HD), a major US retailer of home improvement and construction products. Strong growth is one of the company’s drivers. According to the recently released financial report for Q2 2015, revenue rose 4.3% y-o-y to USD 24.83 bn on the back of a 4.2% increase in LFL sales (5.7% in the US), while EPS jumped 13.8% y-o-y to USD 1.73.

Strong financial results in Q2 2015 and an optimistic outlook going forward allowed Home Depot’s management to raise quarterly dividend by 26% y-o-y to 59 cents per share, which matches a 1.9% dividend yield. The company’s management intends to increase dividend payout ratio to 50% of profit. In addition, the company continues to buy back its shares. Home Depot spent USD 3.09 bn for buyback over six months of FY15 and plans to allocate USD 3.9 bn for further buyback.

Home Depot expects revenue to grow by 5.2-6.0% (previous forecast was 3.5-4.7%) in 2015, while LFL sales will be up 4.1-4.9% (3.3-4.5% earlier). Adjusted EPS will reach USD 5.31-5.36, yielding 13-14% (USD 5.24-5.27 earlier).

We left our target price for Home Depot unchanged at USD 130 and rate the name as a Buy in the mid-term. The short-term technical target is USD 123.

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Home Depot's shares will reach $123 by 11.02.2015

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