A Home Depot rental van is parked in front of a Home Depot store in Daly City, Calif.Justin Sullivan/Getty Images
Home Depot Inc.
Last price: $61.16 (U.S.)
52-week trading range: $36.41-$63.20
Annual dividend: $1.16 per share, yielding 1.9 per cent
Analysts ratings: There are 17 buys, 13 holds and one sell rating on the stock, according to Bloomberg financial data.
Recent history: Shares of the largest U.S. home-improvement retailer have been building momentum over the past year, but have flattened since peaking on Oct. 5. Including reinvested dividends, the stock is up 48 per cent this year. Home Depot has benefited from signs of a rebounding U.S. housing market, and speculation of rising sales as shoppers stocked up on everything from flashlights to generators to prepare for Superstorm Sandy. The tropical storm wreaked havoc on the Eastern Seaboard earlier this month.
Outlook: Home Depot shares could have a small pop on Tuesday if it meets or beats analysts' expectations after reporting third-quarter results before the opening bell. The consensus estimate is calling for a profit of 70 cents a share from 60 cents a year ago.
"The stock has done well," says Jim Huang, president of T.I.P. Wealth Manager Inc. "Having said that, the stock is sitting at a pretty full valuation so it cannot afford much in the way of earnings disappointments. ... I am looking at 21 times earnings for fiscal 2013."
If Home Depot misses consensus expectations, its shares could drop more than 2 or 3 per cent, warned the portfolio manager, who has locked in some profits from the stock. "I believe that would be a short-term phenomenon, and provide a buying opportunity," he said.
"I do believe that there is a U.S. housing recovery going on," he said. "It's not like we are going back to the go-go days, but the [market] hit unsustainably low levels because of the bursting of the housing bubble, and unavailability of financing. It's more of a back-to normal recovery, rather than everybody-owns-a-house recovery."
Still, Home Depot shares could trend lower before year end because of tax-planning reasons. U.S. investors may take profits to to take advantage of lower capital gains rates that are set to rise in 2013 as part of the so-called "fiscal cliff" of tax increase and spending cuts.