Home Depot Inc (NYSE: HD) declined a mere $0.37 in trading yesterday despite reporting awful results. Same store sales were down 6.6% for the quarter and in one month were down 11%--that is pretty bad.However, despite these tough results, management appeared to be confident that the weakness is manageable and measurable. It appears the worst might be hitting Home Depot currently and the poor operating performance could bottom in the first half of 2007.
While Home Depot's supply business rolled over, the real concern appears to be its decision to enter the electronics appliance business. Home Depot mentioned this business was very disappointing. This could be a business line they exit.
Due to the relatively good stock performance following such awful results, investors need to start looking at this stock again. Home Depot will most likely be a Fed stock -- meaning when there is enough evidence that the Fed might start dropping rates, Home Depot stock might be off to the races.
The other thing to look for is a bottoming in its same store sales decline.
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Reader Comments (Page 1 of 1)
2-26-2007 @ 6:45PM
Jerry Bluhm said...
HD's stock price did hold up well considering the awlful results for the fourth quarter. Wall Street is so positive these days this did not surprise me, however, I do see reality coming into focus soon. HD's stock price will drop further from here. The six month prediction will be more like 12 to 18 months before home improvement sales begin to improve. This may the first major pull-back we have seen in many years for this type of business. Wall Street has always had a hard time understanding the home improvement business. You just have to look how long it took WAll-Street to recognize Lowe's would become a major player. Even Wal-Mart was going strong before Wall Street recognized maybe the Sam Walton guy actually was more than just a country boy from Arkansas. So, be careful listening to everything the Wall Street types have to say. Listen to what the leaders of the great companies say. Listen carefully to Lowe's leaders and HD's leaders. Then take a look at the numbers, including all the numbers, not just the current profit statements. My take here again, HD's stock drops from here, based on their performance. IN A year and a half I see the stock begin to improve.