Home Depot Earnings Preview: Goldman Believes No News = Good News

Investors are hoping Home Depot Inc. (HD) can overcome some of the negative effects of the U.S. housing slowdown that has hurt it in recent quarters, but any dramatic improvement seems unlikely when it reports first quarter earnings on Tuesday.

The home improvement retailing giant could see some upside for its shares barring any incremental bad news such as a sales shortfall, Goldman Sachs analyst Matthew Fassler said in a note. He added that while other retailers have come under pressure recently, Home Depot has experience low investor expectations for much longer.

Mr. Fassler also doesn’t think very much premium has been built into the stock in terms of the potential sale of its HD Supply unit, which sells supplies to builders and contractors.

He thinks a sale of this division in the low end of the likely range will have a breakeven impact on Home Depot’s earnings, while a higher price could lead to as much as a 5% earnings per share boost.

“Either way, actual movement in this process could jumpstart psychology on HD shares,” Mr. Fassler said.

He has a “neutral” recommendation and US$41 price target on the stock.

HD 1-yr chart: