Home Depot (HD)

[HenryTo]

HD falling as we speak, even as it beat earnings estimates - due mostly to revenues that were somewhat on the light side. On a trailing 12-month basis, COST has been the lone big retailer that have been overperforming:

http://finance.yahoo.com/q/bc?t=1y&s=COST&l=on&z=m&q=l&c=hd%2Cwmt%2Ctgt
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Home Depot Profit Up, but Shares Fall
Tuesday May 16, 9:46 am ET
By Harry R. Weber, AP Business Writer
Home Depot Reports 19 Percent Jump in 1Q Profit, but Shares Fall in Morning Trade

ATLANTA (AP) -- The Home Depot Inc., the nation's largest home-improvement store chain, reported a 19 percent jump in first-quarter profit on a double-digit increase in sales, though it saw weak demand for flooring and seasonal products.

The earnings, announced Tuesday by the Atlanta-based company before the market opened, beat Wall Street expectations. But Home Depot's shares fell $1.34, or 3.3 percent, to $39.16 in early trading on the New York Stock Exchange due to the retail sales disappointment.

Home Depot said it earned $1.48 billion, or 70 cents a share, for the three months ending April 30, compared with a profit of $1.25 billion, or 57 cents a share, for the same period a year ago.

Analysts surveyed by Thomson Financial were expecting earnings of 67 cents a share.

Revenue in the first quarter rose 13.1 percent to $21.46 billion, compared with $18.97 billion recorded in the same period a year ago. The recent quarter's figure was slightly below the $21.63 billion in revenue analysts expected.

In a conference call with analysts and investors, Bob Nardelli, Home Depot's chief executive, said he was disappointed with the company's overall retail sales in the quarter. He said there was weakness in sales of seasonal items and flooring, the latter being a historical driver of Home Depot's installation business.

Even so, the company reaffirmed its sales and earnings-per-share growth guidance for 2006 and beyond. It still expects 2006 sales will grow in the range of 14 percent to 17 percent and earnings per share will grow between 10 percent and 14 percent, said Chief Financial Officer Carol Tome.

The company acquired Hughes Supply -- a distributor of construction, repair and maintenance products -- in the first quarter, and that company's results are included in Home Depot's consolidated results for the final month of the quarter.

For comparability purposes, The Home Depot said it will no longer report sales at stores open at least a year, a key retail barometer also known as same-store sales, but will now report total sales growth for both of its segments as a percentage change over the prior period.

The company said it increased its average sales ticket in the first quarter by 4.3 percent to $60.75.

Home Depot operates 2,051 stores in the United States, Canada and Mexico.

Home Depot completed its $3.2 billion purchase of Hughes Supply Inc. in late March.

The deal, announced Jan. 10, called for Home Depot to pay $46.50 per outstanding share for Orlando, Fla.-based Hughes Supply and assume $325 million in debt.

The deal, Home Depot's largest acquisition ever, doubled the size of The Home Depot Supply division, which serves business customers, such as homebuilders, professional contractors, municipalities and maintenance professionals.

Hughes Supply has more than 500 locations in 40 states.

In part because of the acquisition, Home Depot said its Home Depot Supply division saw its sales jump to $2.13 billion in the first quarter, compared with $657 million in the year-ago period. It saw the segment's operating profit jump to $149 million in the quarter, compared with $28 million in the same period a year ago.

The Home Depot Inc.: http://www.homedepot.com

[rffrydr]

Eighth down quarter and counting:

http://biz.yahoo.com/ap/080819/earns_home_depot.html
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Today is the Tomorrow you worried about Yesterday!

[rffrydr]

And there's AIG.

And the obverse, selling the energy and materials stands to make more, quicker, than buying the beaten. Interesting question: how much has GM's downturn owed to "finance." Has not particapted in recovery so far.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

On a YTD basis, the fund is ranked 26th among its large cap value peers. On a 3 and 5 year basis, its rankings are 35th and 19th, respectively.

Given that the end of the quarter is a week away (window dressing), I highly doubt that mutual funds in general would start buying the beaten-down names (such as retail stocks like Home Depot) or start selling their energy and materials names. But come April, this may be a different story.

http://quicktake.morningstar.com/FundNet/TotalReturns.aspx?Country=USA&Symbol=TRVLX
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TIP SHEET: T. Rowe Price Value Fund Scans For Troubled Names
Dow Jones Newswires - March 20, 2008 7:30 AM ET

By Jon Kamp

Of DOW JONES NEWSWIRES

A big strategy of the T. Rowe Price Value fund is to look for companies that are badly bruised by negative investor sentiment but still have solid, long-term prospects despite the current market malaise.

Lately, the $7.53 billion fund has been bulking up on retail stocks hurt by worries over the slowing housing market and cutbacks in discretionary spending, such as Home Depot Inc. (HD), the fund's manager John Linehan said. The fund also recently added insurer American International Group Inc. (AIG), which has been rocked by losses linked to troubled mortgage securities.

"The best time to buy stocks is when you're in a recession and you see negative economic growth," Linehan said. Given the fund's long-term outlook and slow rate of turnover, he is willing to look for names where the potential to benefit from a recovery over the long term seems to outweigh the ongoing risks associated with negative news today.

Morningstar rates the Value fund with four out of a possible five stars, and said in an analysis in mid-December that, given Linehan's mostly good track record, perhaps the fund shouldn't lie in the shadows of its bigger T. Rowe Price Equity Income fund sibling.

The Value fund has had a rough time in 2008, along with most other equity funds, down about 7.5% amid broad market turmoil, as of Tuesday. But its growth has been solid in comparison with its peers and the broader market over the long haul, according to Morningstar. Returns are 13.4% on a five-year annualized basis, compared with about 11% for the Standard & Poor's 500.

The fund holds about 120 stocks and tends to have a holding period of about four to six years, Linehan said.

There has been much volatility among the fund's top holdings over the last 12 months, with several companies rising and falling in a double-digit range within that time frame. In the fund's petroleum-lubricated top 10, as measured on Dec. 31, Murphy Oil Corp. (MUR) is a big gainer over the last year, up 51.3% in that timeframe, as of midday Wednesday.Other major holdings showing big returns amid record crude oil prices include oilfield services company Schlumberger Ltd. (SLB) and French oil giant Total SA (TOT).

Despite the top-heavy focus on energy companies, Linehan said the Value fund is light on energy among the ranks of smaller holdings, and is "a little underweight" in energy overall. He also noted that the fund has not been selling the energy stocks it does own, and has been adding to positions on the margins.

"We're very willing to let our winners run," he said. "Part of it has just been a healthy respect for the energy markets."

The fund also has some stocks in its upper ranks that have slumped in a major way over the last 12 months, including Time Warner Inc. (TWX), Home Depot and Genworth Financial Inc. (GNW).

General Electric Co. (GE), where shares have risen 6.4% over the last year, is the Value fund's largest holding, and has been for a couple of years. Linehan said he is attracted to GE's valuation, growth potential over the next several years and the massive conglomerate's portfolio of businesses. He said the one knock on GE is that it has been paying too much for acquisitions.

Another big holding, health-care conglomerate Johnson & Johnson (JNJ), is also appealing because of its diversification, Linehan said. The company's big pharmaceuticals, consumer products and medical devices businesses create the chance to keep at least one engine humming while another may need a tune up, and J&J has been a very steady earnings grower, Linehan said.

J&J shares are up 8% over the last year.

Following the strategy of adding shares of companies battling poor investor sentiment, Linehan said the fund aggressively added to its retail holdings in the fourth quarter. In addition to Home Depot, it was buying T.J. Maxx parent TJX Cos. (TJX), Wal-Mart Stores Inc. (WMT) and department store-operator Kohl's Corp. (KSS).

These are names Linehan feels have been beaten up about as much as possible by negative sentiment. "We've basically got a huge opportunity to profit" from any acceleration, he said.

Another attractive area right now is cable and satellite television, where valuations are washed out, Linehan said. The fund owns Dish Network Corp. (DISH) and has a stake in DirecTV Group Inc. (DTV) through Liberty Media Corp.'s (LINTA LCAPA) Liberty Capital. Liberty owns a stake in DirecTV.

Concerns about cutbacks in discretionary spending hurting the television-related stocks are "more than reflected in the stock price," Linehan said.

In the financial sector, where he said the Value fund may have moved too fast to get involved with AIG, it's difficult to suggest right now that the downside risk is limited, Linehan said. For the financials, investor worries have a real impact on operations because they can limit companies' access to capital, he noted.

"Fear and negative sentiment is a volatile brew," he said.

On the AIG front, shares of the huge insurer have tumbled about 33.2%over the last year and 23.3%so far this year, although shares got a major boost on Tuesday following the latest Federal Reserve interest rate cut. The company recently reported that for the fourth quarter, unrealized market valuation losses on its portfolio rose to $11.12 billion. There are worries that AIG losses will continue to pile up.

"I don't think you can ever feel really good about a company that's had the performance that AIG has had in the last several months," Linehan said. "If we focus on the short-term, there is not really a compelling reason to own the stock."

But when he calculates the potential for AIG shares should the storm subside, Linehan also sees an opportunity for significant upside.

[HenryTo]

A preview of HD's earnings tomorrow morning:

http://www.fool.com/investing/value/2007/11/12/foolish-forecast-home-depot-falling-apart.aspx

[HenryTo]

Home Depot's liquidity suffering from the fallout effects of subprime, etc.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSUueO7abLZA&refer=home

[rffrydr]

Saw a HD office delivery vehicle today here in Santa Monica--strange concept but I guess that legacy is paying off.

Guidance today not projecting any bump in housing util '08; forecasts standing same store sales in low single digits.

http://www.businessweek.com/ap/financialnews/D8NIVQGG0.htm

Said to be hiring retirees: they know what "service" is.
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Today is the Tomorrow you worried about Yesterday!

[PonderThis]

Home Depot and Lowe's are reliant upon the housing bubble and home equity loans. People feel justified in spending any amount of money, even if it is borrowed, to upgrade their home because they see it as a high-yielding investment. When home values start to erode and eat up equity, HD and LOW will get hammered as the equity line of credit spigot turns off.
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Kemp Moyer
www.ponderthis.net