Can Home Depot Follow Lowe’s Up On Earnings? (HD, LOW)

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The Home Depot, Inc. (NYSE: HD) is set to report earnings on Tuesday morning before the open.  This comes on the heels of its smaller rival Lowe’s Companies Inc. (NYSE: LOW), which is trading up after beating lowered earnings targets.  While earnings did drop and while it followed suit of other retailers with lower guidance, the focus today seems to revolve around the fact that the company managed to beat the lowered expectations.  Lowe’s estimates over the last quarter had been cut from $0.33 EPS down to $0.28 EPS. 

So what is expected out of Home Depot (NYSE: HD) is $0.38 EPS.  Forwhatever this is worth, the estimates on earnings were actually cutless for Home Depot on a percentage basis.  One quarter ago, theestimates were $0.43 EPS.

Lowe’s shares are up almost 7% mid-afternoon at $19.47 and its 52-weektrading range is $15.76 to $28.49.  Home Depot shares are actually downby 1% today.  It seems that if the company can follow the path of itssmaller rival by beating lowered targets and sharply lower guidancethat Tuesday could be a good day for Home Deport shareholders.

What is interesting here is that both companies have beaten estimatesfor each of the last two quarters by a fairly wide margin.  It seemsthat the bar is being set ultra-low.  With this housing market, maybeanything still showing earnings is deemed good enough.

With Home Depot stock at $20.35, its 52-week trading range is $17.05 to $31.08.

Jon C. Ogg
November 17, 2008