Home Depot Inc HD is scheduled to report its Q4 results on February 21. The company may deliver another strong quarter, despite strong comps last year, but would likely announce conservative guidance for 2017, BTIG’s Alan Rifkin said in a report. He maintains a Buy rating on the company, with a price target of $155.
4Q Preview And Guidance
Rifkin expects Home Depot to report EPS of $1.33, up from $1.17 last year and $0.01 ahead of the guidance. He estimated 4Q comp of 3.5 percent, versus last year’s tough 7.1 percent comp.
Home Depot typically announces conservative guidance, and may do so for its 2017 outlook, reflecting GAAP EPS growth of 11-12 percent. “The increasing interest rate and government policy backdrop add some uncertainty,” Rifkin commented.
Focus On NAFTA, Border Tax
Investors would likely focus on the border tax issue during the earnings call. The analyst noted that Home Depot’s direct import exposure is estimated at only 10-20 percent, although indirect import exposure has not been disclosed and could result in “additional cost inflation under a border tax adjustment.”
Related Link: Analyst Sees Odds Of U.S. Border Tax Passage Increasing To 75%
Management has already indicated that the company may need to raise prices due to higher import prices. “Other policies, including a lower corporate tax rate and a reduced repatriation tax on HD’s $2 billion of overseas cash, would be beneficial,” Rifkin wrote.
Home Depot has 117 stores in Mexico, and NAFTA renegotiation may be a topic of discussion, although “our analysis shows NAFTA presents less than a 1 percent risk to EPS,” the analyst stated.
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