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4 Reasons That Make Home Depot (HD) Stock a Safe Haven

Zacks Equity Research

The Home Depot Inc. HD is one of those S&P 500 stocks that never lets down. This home improvement retailer has surged 29% in a year, beating the industry’s 22.1% growth. The company has long been on growth trajectory, courtesy of its spectacular surprise history and solid growth strategies. On top of it, expected recovery endeavors post Hurricane Harvey’s mayhem gave investors another reason to be bullish on the stock. So, it is definitely worthwhile to get an insight into the factors that are likely to boost this Zacks Rank #2 (Buy) stock further.

Home Depot Riding on Interconnected Strategy

In response to the evolving retail environment, where digital and physical stores go hand in hand, the company remains keen on building its interconnected capabilities. In this direction, the company has made great strides by redesigning its website with enhanced features. The benefits from these initiatives were evident from online sales growth of nearly 23% in second-quarter fiscal 2017. Also, dotcom sales represented nearly 6.4% of the company’s top line. Moreover, Home Depot’s interconnected strategy goes beyond the dot.com investments as it continues to invest in fulfillment options to cater to customers’ demand. We believe that these efforts will drive the company’s top and bottom line in the long run.

Focus on Pro Customers Remains a Driving Factor

Home Depot has been gaining from its focus on Professional Customers, or Pro Customers. Notably, sales from this category continued to outperform in second-quarter fiscal 2017. Well, the company has undertaken several strides in this regard, which has helped it reap significant benefits. As evidence, Home Depot recently acquired Compact Power Equipment, which marked another step toward improving portfolio service offerings to Pro customers. This buyout is likely to have a positive impact on the gross margin in fiscal 2017.

Home Depot’s Stellar Past Record, View Boosts Estimates

Home Depot has been reporting strong financial figures since 2008, with steady improvement in revenues and earnings per share. Incidentally, both the top and bottom line grew year over year and topped estimates in second-quarter fiscal 2017. While sales marked its 13th straight beat, earnings retained its five-year long trend of positive surprise. Apart from the aforementioned factors, the company’s focus on innovations and driving productivity seems to be paying off. Also, housing market recovery remains a tailwind. These factors, along with expectations of better home prices and re-emergence of first-time homebuyers, encouraged management to raise its sales and earnings per share outlook for fiscal 2017.

Home Depot, Inc. (The) Price and Consensus

Home Depot, Inc. (The) Price and Consensus | Home Depot, Inc. (The) Quote

Analysts were also not far behind in raising the estimates, as evident from upward revision in the Zacks Consensus Estimate. Over the past 60 days, the Zacks Consensus Estimate for fiscal 2017 and 2018 increased from $7.23 to $7.31 and $8.11 to $8.24, respectively.

Home Depot Versus Industry Scorecard

All said, we believe that Home Depot is moving in the appropriate direction. With its perfect initiatives and solid background, this largest home improvement retailer is most likely to keep its momentum going.

Looking for More? Target These 3 Retail Stocks

Ross Stores Inc. ROST, with a long-term EPS growth rate of 10% and a superb earnings surprise history carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lumber Liquidators Holdings, Inc. LL has a long-term growth rate of 27.5%. The stock carries a Zacks Rank #2.

Carrying a Zacks Rank #2, Burlington Stores Inc. BURL has a long-term EPS growth rate of 16.2%. The stock also has a solid earnings surprise history.

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Home Depot, Inc. (The) (HD) : Free Stock Analysis Report
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