Could Home Depot And Lowe's Beat The Market?

Home Depot Inc HD and Lowe's Companies, Inc. LOW could be among the few companies that actually beat earnings estimates this quarter, at least according to Deutsche Bank. "While January and February are lower-volume months, the beat relative to expectations on seasonally adjusted numbers was read positively for consumer spending," analysts Mike Baker and Adam Sindler wrote in a note out Tuesday. "The non-seasonally adjusted numbers were softer at up 1.4%, but that could be explained by a calendar shift, thus the seasonal adjustment. Either way, one sector that stood out was sales through 'building material, garden equipment, and supply stores.'" The analysts said this data series grew 4.4 percent for Home Depot's and Lowe's 4Q15, an acceleration from 3.2 percent in 3Q15. "Historically, this data correlates at 80% to HD and LOW comps, suggesting that their comps should accelerate as well," the note continued. "[Y]ear to date, HD and LOW have grown total comps 1.3% and 0.9% faster than this data series. If that relationship holds, HD and LOW will comp at 5.7% and 5.3% respectively for 4Q, an acceleration from 5.1% and 4.6% last quarter and better than consensus of 4.3% and 3.6%, making the home centers among the few retailers that will beat." Deutsche Bank's estimates are 4.5 percent and 3.7 percent, respectively. For Lowe's in particular, the firm expects 2016 EPS guidance to likely be above the current consensus of $3.96, making it one of the very few retailers that could guide ahead of expectations. "An extra week in 2016 helps," the note concluded. The firm holds a Buy rating and $135 price target on Home Depot and a Buy rating at $80 target for Lowe's. Home Depot is scheduled to report its earning on February 23; Lowe's is scheduled for February 24.