Andreas
0
All posts from Andreas
Andreas in Gainers & Losers,

Investment idea - Home Depot

We are upbeat about shares of Home Depot (HD), a major US retailer of home improvement and construction products. The company is aggressively expanding its business. Home Depot recently opened a new logistics center to support online sales in Troy (Ohio). The area of the center is 1.6 mn sq ft and it will employ about 500 people. The company plans to put into operation a similar 200,000 sq ft technological center employing 500 people in Marietta (Georgia) in October and online customer support center employing 800 people in Tempe (Arizona) in November.

The company demonstrates double-digit growth. 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 climbed 13.8% y-o-y to USD 1.73.

Strong financial results in Q2 2015 and optimistic outlook for the future allowed Home Depot’s management to raise quarterly dividend by 26% y-o-y to 59 cents per share, yielding 1.9%. 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% (vs. 3.3-4.5% earlier). Adjusted EPS will reach USD 5.31-5.36, yielding 13-14% (vs. 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 125.