This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Home Depot: More Savings, Less Doing

Stocks in this article: HD LOW WMT MCD TGT

NEW YORK ( TheStreet) -- I was chided two months ago when I told investors that shares of Home Depot (HD - Get Report), which were then coming off a strong May quarter report, were not as attractively priced as rival Lowe's (LOW), which, by contrast, had posted a disappointing first quarter.

Two months later, it seems the Street agrees. Home Depot has traded flat to slightly down while Lowe's has been up by more than 12%.

I'm not going to overstate what this means. A two-month performance does little to erase the fact that shares of Home Depot, which have soared more than 190% over the past five years, more than doubled Lowe's performance during that same span. But that's exactly the point. The Street has always loved this stock. What are the odds this love affair will last for the next five years? If this recent quarter was any indication, Home Depot is determined to make it a hard breakup.

It's not often that I get excited about an earnings performance. But what Home Depot managed to do was pretty remarkable. Not only did the company post revenue growth of more than 9%, but same-store sales (comps), which track the performances of stores that have been opened for at least one year, surged closed to 11%. This is an astounding number, especially since the Street was looking for same-store sales growth of just 7%.

Here again, I want to be careful to not exaggerate the meaning of this number. But just to put it in proper perspective: Wal-Mart (WMT) just posted flat comps, while the Street would have been happy if Wal-Mart had only delivered 1% growth. Likewise, McDonald's (MCD) just recently posted 1% growth in comps. Obviously, McDonald's and Home Depot are in completely separate businesses. But it's still consumer spending.

What's more, you would have to go back to 1999 to find when Home Depot performed so well in terms of U.S. comps. Clearly, the company knows what it's doing. The Street is more than justified for wanting to "build a position" in Home Depot.

My issue, though, is given the stock's strong uptrend over the past five years, which was spurred by the housing recovery, I just don't believe there's much outperformance left.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs