Home Depot Raises the Roof

On the back of the worst daily decline since early November, stocks opened higher this morning, with the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) up 0.64% and 0.88%, respectively, as of 10:05 a.m. EST.

The "Old Tech" trade
Deutsche Bank
is recommending what it calls the "Enduring 8" -- stalwart technology companies Cisco, EMC,
Hewlett-Packard (NYSE: HPQ  ) , IBM, Intel, Microsoft, Oracle, and NetApp. In a low-growth economy, this seems a reasonable idea, on the face of it. The numbers certainly back it up:

 

Enduring 8 (average, market-cap weighted)

Forward P/E

10.6

Return on equity, trailing 12 months

35%

Return on capital, trailing 12 months

17.7%

Source: S&P Capital IQ.

All three of these metrics compare favorably with those of the S&P 500 (or for the Nasdaq, I suspect). However, if you're going to be picking stocks, it may be worth a deeper dive to select the most promising of these "Enduring 8"; some of these companies are facing significant secular headwinds, such as the shift from the PC to the tablet and smartphone (I'm looking at you, HP).

Home Depot's earnings
This morning, home improvement retailer and Dow component
Home Depot (NYSE: HD  ) reported results for its fiscal fourth quarter ended Feb. 3, and the numbers were encouraging.

The company earned $0.68 per share on $18.2 billion in revenue, which compares favorably with Wall Street's forecasts of $0.64 and $17.7 billion, respectively. For the full fiscal year, U.S. comparable-store sales grew 4.9% -- roughly 1 percentage point faster than the growth rate of the economy. The company also announced a 34% increase in its dividend to $0.50 per share (equivalent to a 3.1 dividend yield, based on yesterday's closing share price) and a massive new $17 billion share repurchase authorization (nearly a fifth of the company's current market value). Accordingly, Home Depot shares are up 5.6% as of 10:10 a.m. EST.

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  • Report this Comment On February 26, 2013, at 11:13 AM, Dabkat wrote:

    I must smile every time I see that a company has failed to meet or has beaten analysts numbers. The fact is that the company reports facts. The analysts issue guesses, which are mostly wrong. However the reporting always makes it look like the company made the error, when in fact the analysts were at fault which is an indication of how poor their estimations are.

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Related Tickers

4/17/2014 11:20 AM
^DJI $16413.58 Down -11.27 -0.07%
DOW JONES INDUSTRI… CAPS Rating: No stars
HD $77.26 Up +0.68 +0.89%
Home Depot CAPS Rating: ***
^GSPC $1864.15 Up +1.84 +0.10%
S&P 500 INDEX CAPS Rating: No stars
HPQ $31.65 Down -0.84 -2.59%
Hewlett-Packard Co… CAPS Rating: **

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