Earnings Preview: Home Depot

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Includes: HD, LOW
by: Theflyonthewall

The Home Depot (NYSE:HD) is expected to report Q2 earnings Tuesday prior to the open with a conference call scheduled for 9:00 am ET.

Guidance

Analysts are looking for a profit of 61c on revenue of $20.55B. The consensus range is 57c to 66c for EPS, and revenue of $20.2B to $20.93B, according to First Call. On June 5, Home Depot reiterated its FY08 EPS and sales forecasts for EPS down 19% to 24% and revenue down 4% to 5%; the company said it is comfortable with the low end of this forecast.

Analyst Views

Investor Jeff Coons, the co-director of Research, Manning & Napier Advisors, likes Home Depot. He said it, along with rival Lowe's (NYSE:LOW), are financially stronger than their competitors and will be able to gain market share through the economic downturn. 

Rochdale Research is equally as optimistic about the stock, explaining that after a decade of excessive growth and eroding returns on incremental capital, the company has shifted its strategic focus from growth to maximizing return on invested capital and cash flow. The firm expects Home Depot's earnings power will expand as growth in the industry slows, and as it executes a merchandising transformation, supply-chain upgrade, and approaches the optimal capital structure. Home Depot is highly leveraged to further declines of home-improvement spending, the firm added.