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VIDEOTicker Shock: Four Reasons Why Home Depot Is a Constructive Buy
Wednesday's top stories and stocks with potential to move.
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Asian stocks closed higher. The Hang Seng was up better than 4%, and the Nikkei was up more than 2%. Europe was higher earlier this morning as well. And here in the US, we're currently trading lower,
Here's what I’m focused on this morning:
Home Depot (HD):
Some good news out today. According to a release: “Today the Company is updating its FY2009 EPS guidance and now expects earnings per share from continuing operations to be flat to down 7% from last year. On an adjusted basis, the Company now expects earnings per share from continuing operations to decline by 20-26%. The Company previously announced its expectation that earnings per share from continuing operations in FY2009 would be down 7% from last year, and down 26% on an adjusted basis.”
My thoughts:
1. Less bad is a good thing. But in and of itself, that isn’t gonna get me off the dime and buy the stock.
2. What does inspire (to a degree) is the belief that average folks are going to start spending some coin around the house, given the better weather and the fact that the economic clouds are lifting (or at least appear to be).
3. Another big positive I think will garner attention is the fact that the estimate has been cranking up. Over the last month or so, the estimate for this year has gone from $1.32 to $1.40. Dollars to donuts it ticks up a bit more in the weeks ahead.
4. What might really drive sales more is an alternative to their Sunny Delight-orange uniforms. (Kidding, folks.)
I’m thinking the stock gets a nice goose today.
Shuffle Master (SHFL):
This isn’t the type of company I typically opine on in Ticker Shock. It's kind of small with a market cap of only about a quarter billion or so. But I think it deserves a mention because it did seem to deal out a decent second quarter. The company known for its casino equipment turned in a dime per share, excluding items --which was leaps and bounds north of the $0.04 the Street was looking for. It also, like NDN, managed to beat out expectations on the top line.
Some thoughts:
1. I like the idea of playing the gaming-supply companies. While the industry is still facing some pretty big headwinds, I think they're a tad less risky than betting on the performance of some of the individual operators right now.
2. It’s expected to click out some decent earnings: The expectations are $0.21 this year and $0.27 next year.
3. If it can punch through and hold steady above that $5 mark, it might get a lot more loving from the Street.
4. I had to share this line in the release that really stuck out to me: “The Company’s debt compliance requires that it maintain an interest coverage ratio of at least 3.0 to 1.0; currently, the Company is at 11.7 to 1.0.”
One thing though: Insiders, how about anteing up in the open market?
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