Jefferies Raises Targets on Wal-Mart, Lowe's, Cuts Target on Home Depot

Jefferies commented on the Hardlines sector Wednesday morning, revising price targets and estimates on The Home Depot, Inc HD, Lowe's Companies Inc. LOW, Wal-Mart Stores Inc. WMT. Citing the weather as a factor early in the quarter, Jefferies analyst Daniel Binder noted an improvement in the weather in April. He believes traffic trends have improved -- except in the home improvement-centric firms like Home Depot and Lowe's -- both of which had tough comparisons for April.

• Wal-Mart - Price target raised from $87 to $92 - Binder said, “Our 1-year $92 PT is based on WMT selling at about 15.5x our FY16 (Jan16) EPS estimate of $5.91. WMT shares look attractively priced relative to consumer staples companies which are getting valuations in the mid to high teens. Nonetheless, we think that the market could respond favorably to a potential modification of the international unit growth profile, which we think could be coming at some point this year, so we are maintaining our Buy rating."
• Home Depot - Target lowered from $94 to $90 - “Our $90 price target on HD shares is based on shares the selling at about 20x our FY15 estimate of $4.50," according to Binder. "Lenders are easing and FannieMae and Freddie Mac just announced they will shift their focus toward making more credit available to homeowners. In other words, we could be experiencing a mid-cycle slowdown, but there may be another leg up in housing as the Economy continues to recover and supply improves."
• Lowe's – Target raised from $44 to $45 - Binder went on to say, “Many of the reasons outlined in our discussion of Home Depot, As we noted above, our fieldwork on many of the companies we cover showed evidence of improvement in April, but we do not think that Lowe's experienced this, possibly due to the tough comparisons it faced a year ago. We also think LOW will show softer growth than HD and there is a possibility that the comp store sales gap widened slightly”