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The Home Depot, Inc. (HD) Raises the Roof

On the back of the worst daily decline since early November, stocks opened higher this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average up 0.64% and 0.88%, respectively, as of 10:05 a.m. EST.

The Home Depot, Inc. (NYSE:HD)The “Old Tech” trade
Deutsche Bank AG (USA) (NYSE:DB) is recommending what it calls the “Enduring 8” — stalwart technology companies Cisco, EMC, Hewlett-Packard Company (NYSE:HPQ), IBM, Intel, Microsoft, Oracle, and NetApp. In a low-growth economy, this seems a reasonable idea, on the face of it. The numbers certainly back it up:

Enduring 8 (average, market-cap weighted)
Forward P/E 10.6
Return on equity, trailing 12 months 35%
Return on capital, trailing 12 months 17.7%

Source: S&P Capital IQ.

All three of these metrics compare favorably with those of the S&P 500 (or for the Nasdaq, I suspect). However, if you’re going to be picking stocks, it may be worth a deeper dive to select the most promising of these “Enduring 8”; some of these companies are facing significant secular headwinds, such as the shift from the PC to the tablet and smartphone (I’m looking at you, HP).

The Home Depot, Inc. (NYSE:HD)’s earnings
This morning, home improvement retailer and Dow component
Home Depot reported results for its fiscal fourth quarter ended Feb. 3, and the numbers were encouraging.

The company earned $0.68 per share on $18.2 billion in revenue, which compares favorably with Wall Street’s forecasts of $0.64 and $17.7 billion, respectively. For the full fiscal year, U.S. comparable-store sales grew 4.9% — roughly 1 percentage point faster than the growth rate of the economy. The company also announced a 34% increase in its dividend to $0.50 per share (equivalent to a 3.1 dividend yield, based on yesterday’s closing share price) and a massive new $17 billion share repurchase authorization (nearly a fifth of the company’s current market value). Accordingly, The Home Depot, Inc. (NYSE:HD) shares are up 5.6% as of 10:10 a.m. EST.

The article Home Depot Raises the Roof originally appeared on and is written by Alex Dumortier, CFA.

Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Home Depot.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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