Collins Stewart Starts Home Depot (HD) at Neutral; Appears To Be Gaining Some Sales Momentum, But Fairly Valued

Collins Stewart initiates coverage on Home Depot (NYSE: HD) with a Neutral. PT $44.00.

Collins analyst says, "Sales trends appear to be improving for Home Depot, as SSS have increased on a 2-year basis for four consecutive quarters following 17 straight declines. We believe the company’s recent infrastructure investments will improve its supply chain and technology systems, enhancing gross margin expansion potential. Management raised its FY11 EPS guidance following Q3 results, and we expect HD’s recovery to continue with double-digit earnings growth in FY12. Based on our FY12 estimates, shares currently trade at 15x EPS and 9x EV/EBITDA. We view this as a fair valuation, given the limited visibility surrounding the housing market and home-related spending."

"We estimate FY11 EPS of $2.38, reflecting management’s $0.04 increase to its previous $2.34 guidance following Q3 results. HD has beaten consensus EPS estimates every quarter since Q4:07. For FY12, we look for EPS of $2.74, $0.01 above consensus."

For an analyst ratings summary and ratings history on Home Depot click here. For more ratings news on Home Depot click here.

Shares of Home Depot closed at $40.42 yesterday.

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