Storms and Earnings to Drive Home Depot, Lowe’s

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The violent weather that hit the U.S. Midwest on Sunday has claimed six lives so far and left hundreds of thousands of people without electricity. Illinois took the brunt of the pounding as one tornado virtually destroyed the small town of Washington in the southern part of the state.

In Kentucky, a possible tornado posed a threat to the USEC Inc. (NYSE: USU) uranium enrichment operations in Paducah, and company officials reported no injuries or any release of hazardous material from the plant. Just last week, USEC was the beneficiary of a ruling by the U.S. International Trade Commission to retain duties on low-enriched uranium imports from France.

If history is any guide, the devastation caused by the storms likely will provide something of a boost to shares of home improvement giants Home Depot Inc. (NYSE: HD) and Lowe’s Companies Inc. (NYSE: LOW). Rebuilding after Hurricane Sandy bolstered both companies last year, and we would expect a similar impact from Sunday’s storms as well.

Both companies report earnings this week, Home Depot on Tuesday and Lowe’s on Wednesday, and now might be a good time to take a look at what is expected.

Home Depot is forecast to report earnings per share (EPS) of $0.89 on revenues of $19.17 billion. The EPS estimate has been raised by a net penny in the past 90 days and is $0.15 a share higher than in the third quarter of last year. The estimates for the company’s fourth quarter, ending in January, call for EPS of $0.73 on revenues of $17.87 billion. The company earned $0.67 in last year’s fourth quarter.

Analysts’ consensus price target on Home Depot stock is around $85.70. Shares closed at $80.03 on Friday and were trading a bit higher early Monday at $80.11.

At Lowe’s, analysts expect EPS of $0.48 in the third quarter, up from $0.40 a year ago. Revenue is expected to come in at $12.72 billion, up about $650 million. In the fourth quarter, analysts expect EPS of $0.33, up from $0.26 a year ago, on revenues of $11.57 billion, about $520 million higher than in the year-ago quarter.

The consensus target price for the stock is around $51.10, and the stock was trading above that early Monday, at $51.75 after closing at $51.77 on Friday.

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