Home Depot revised its full-year guidance upward slightly after it agreed to buy back 289.3 million shares of its common stock for $10.7 billion. The $37-per-share price is at the low end of the company's $37-42 tender offer. The buyback amounts to 14.6% of Home Depot's outstanding shares. The company is now forecasting EPS from continuing operations to fall by 7-9% in fiscal 2007 versus a prior estimate of a 12-15% drop. The new guidance reflects the company's expectation that the number of its outstanding shares will be reduced by about 165 million and 290 million shares in Q3 and Q4, respectively. Last month, Home Depot sold its contractor supply business to a private equity group for $8.5 billion, an almost 18% discount to a previously agreed-upon price. The proceeds of that sale funded most of this portion of the company's planned $22.5 billion buyback. Home Depot now has approximately 1.69 billion shares outstanding. In related news, Home Depot CFO Carol Tome said Monday the company is expecting turmoil in the housing market to continue into next year. The implosion of the subprime-mortgage market "is impacting the housing environment," she said. "We don't think we'll see an improvement in that until the back half of 2008."
Sources: Press release, Reuters, Wall Street Journal, TheStreet.com, Bloomberg
Commentary: Home Depot's Tender Offer Disappoints; Shares Fall • Home Depot's Supply Unit Sale Was a Fiasco • Home Depot Slashes Unit Sale Price By 18%
Stocks/ETFs to watch: HD. Competitors: LOW. ETFs: RTH, XHB, VCR
Earnings call transcript: The Home Depot Q2 2007
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