Jefferies Lifts Target on Home Depot (HD) to $34

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Jefferies Lifts Target on Home Depot (HD) to $34; Likes FCF, But P/E May Be Capped Near Term

November 16, 2011 8:42 AM EST

Jefferies boosted its price target on The Home Depot (NYSE: HD) from $33 to $34 following third-quarter results. The firm maintained its Buy rating on the stock.

Home Depot reported third-quarter earnings of 60 cents per share, which was 2 cents stronger than Jefferies and the Street’s view. Amid the strong results, Home Depot management only raised its 2011 sales outlook and left earnings alone.

On the numbers, Jefferies commented, “Don’t expect increased leverage to buy stock, but FCF is robust to keep buybacks going strong. Shares are trading toward the upper end of what we view as a fair value range, based on our discounted cash flow analysis.”

For 2012, Jefferies is increasing EPS estimates from $2.29 to $2.38, and for 2013, earnings move from $2.36 to $2.50 per share.

Finally, the firm said, “we think the P/E multiple is likely capped near-term given modest share loss according to government and TraQline numbers recently, an emerging online competitive threat and a weak macro backdrop marked by deterioration in the Architectural Billings Index, remodeling indexes and Banks’ Willingness to Lend Index.”

For an analyst ratings summary and ratings history on Home Depot click here. For more ratings news on Home Depot click here.

Shares of Home Depot closed at $38.07 yesterday, with a 52 week range of $28.13-$39.38.