Deutsche Bank Comments On Home Depot After Buyback Announcement

Home Depot HD announced priced $2b in senior notes last night, planning to use $1b to replace existing debt that came due and the other $1b in an accelerated share repurchase. Deutsche Bank estimates that the reduction in shares will be accretive by $0.02 in 2011 and $0.04 in 2012, assuming the stock is repurchased at the beginning of 2Q11. Its model had already assumed that HD takes on additional debt this year, but the $1b in additional buybacks is incremental to the model. The $1b in new buybacks will be in addition to previously announced buybacks of $2.5b, which are to be bought back throughout 2011 in the open market. HD reiterated its plan of $2.20 in EPS this year. The originally planned buybacks of $2.5b for the year would have added $0.05, meaning the true previous guidance was $2.25. Consensus estimate was $2.30 and Deutsche Bank's estimate was $2.29. The additional $1b in buybacks announced last night brings Deutsche Bank's 2011 estimate now to $2.31 and its 2012 estimate to $2.63. Deutsche Bank has a $38 PT and Hold rating on HD HD closed Monday at $36.65