Home Depot: Considerable upside exists

By Money Matters Editors

The Home Depot’s (HD) Q3 earnings report is an example of what ails Wall Street right now: an expectations game that’s slightly unrealistic.

Home Deport reported Q3 EPS of 41 cents per share Tuesday, well above the First Call EPS consensus of 36 cents, and what did Wall Street do? Of course it sold the stock, with shares closing down about 30 cents to $26.99.

Home Depot even offered decent Q4 earnings guidance of 13 cents per share, compared to the First Call EPS of 16 cents. True, same store sales are decelerating, but that’s no surprise, given the housing sector’s contraction and the ‘frugal consumer’ era. In any event, the company still expects FY2009 EPS of $1.55 – in-line with the First Call FY2009 EPS estimate of $1.55.