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Why Tesla Motors, Home Depot, and Macy's All Jumped

By Jeremy Bowman - Feb 25, 2014 at 10:00PM

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Home Depot and Macy's both moved higher on strong earnings, while Home Depot got a major endorsement from an analyst.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis. 

While Bitcoin-exchange site Mt. Gox's disappearance stole headlines today, stocks finished slightly down as the S&P 500 closed 0.1% lower after yesterday's record intraday-trading high. A subpar consumer confidence report combined with mixed earnings updates to leave the market nearly even, and the Dow Jones Industrial Average (^DJI -0.24%) finished down 27 points or 0.2%.

Consumer confidence fell more than expected, according to the Conference Board, whose gauge dropped from 79.4 last month to 78.1, worse than expectations of 80.8. Though the decline is small, it may signal that there's more to the recent weak economic data than just bad weather as the market has blamed. Notably, fewer Americans believed that business conditions would improve in the next six months, perhaps a reflection of the last two months' poor jobs reports.

Two housing reports showed home prices continuing to rise, however, and Home Depot (HD 0.16%) stock jumped 4% after the home-improvement retailer delivered a strong earnings report this morning. Home Depot beat bottom-line estimates with a per-share profit of $0.73 against expectations of $0.71, though sales came up short. Revenue fell 3% to $17.7 billion, due to a calendar shift, which below the consensus at $17.92 billion, but same-store sales improved by a healthy 4.4% clip. The retailer also sees that growth rate holding steady, projecting a 4.6% increase in comps for 2014, and bumped up its quarterly dividend payout 21% to $0.47, to the delight of investors, giving it a 2.3% dividend yield. Its EPS projection for the current year of $4.38 was slightly below estimates at $4.43, but I'd expect this stock to remain a solid bet as long as the housing market continues to improve.

Elsewhere, Tesla Motors (TSLA -6.54%) stock was rallying once again, finishing up 14% after a ringing endorsement from Morgan Stanley, which lifted its price target to $320 after analyst Adam Jonas said the electric-car maker could be on the verge of disrupting two industries. Jonas said the company's recent announcement that it would build the world's largest battery factory would lower the cost of battery cells and make Tesla a major competitor in electricity storage. Separately, the car-maker's Model S sedan was named top overall automobile by Consumer Reports, just the latest accolade for the luxury vehicle. Tesla shares are now up more than seven times in the past year, but analysts have bumped up their estimates and now expect earnings to double this year and next, making the stock look not as expensive as one might think, especially considering its recent string of earnings beats.

Finally, Macy's (M -5.58%) was also a big gainer, finishing up 6% after turning in earnings this morning. The department-store chain posted better-than-expected profits despite sluggish sales as wintry weather in January forced revenue below estimates. Per-share profits came in at $2.31 better than estimates of $2.17, while comparable sales still improved 1.4%. For 2014, the retailer sees comps improving and it EPS estimates of $4.40-$4.50 matched analysts'. As rivals like J.C. Penney continue to falter and Macy's continues implement smart cost-cutting strategies, I'd expect its shares to continue to move higher.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,803.26 (-0.24%) $-76.98
The Home Depot, Inc. Stock Quote
The Home Depot, Inc.
$286.50 (0.16%) $0.47
Macy's, Inc. Stock Quote
Macy's, Inc.
$17.34 (-5.58%) $-1.02
Tesla, Inc. Stock Quote
Tesla, Inc.
$630.77 (-6.54%) $-44.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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