This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
TheStreet Open House

Home Depot: More Savings, Less Doing

Stocks in this article: HDLOWWMTMCDTGT

NEW YORK ( TheStreet) -- I was chided two months ago when I told investors that shares of Home Depot (HD), 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

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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 16,708.47 +247.15 1.50%
S&P 500 1,953.67 +26.56 1.38%
NASDAQ 4,456.3650 +73.5180 1.68%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

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