Build Your Nest Egg With Home Depot, Raytheon, Says TIAA-CREF Manager

Home Depot just nailed Wall Street's consensus earnings and revenue estimates in its third quarter results.
By Gregg Greenberg ,

Home Depot (HD) - Get Report hammered Wall Street's consensus sales and earnings estimates in its third quarter results Tuesday. Susan Kempler, portfolio manager for the TIAA-CREF Growth & Income Fund (TIIRX) - Get Report , predicted this won't be the last stellar report for the retailer.

"They've got great growth in residential and commercial so this growth can continue," said Kempler. "They are expanding margins because they are cutting back on costs, while at the same time they are growing revenue and buying back a lot of stock."

Quarterly net income at the company jumped over 12% to $1.73 billion, or $1.35 per share, from the same period a year ago. Excluding one-time items like currency fluctuations, Home Depot earned $1.36 per share, topping Wall Street's average estimate of $1.32. Shares of Home Depot are up 21% year-to-date.

Kempler is also bullish on  Electronic Arts (EA) - Get Report , saying the video game maker's stock has more room for growth even though it has surged over 50% thus far in 2015. She said mixed-to-negative reviews of its Star Wars themed game will not drag the stock down to earth.

"They have a pipeline that they have not had in years," said Kempler. "They have four to five big releases next year that could be blockbusters for them."

Kempler added that the company will also benefit from a revenue shift now that more than half of industry sales are coming from higher-margin digital games.

She is positive on Northrop Grumman (NOC) - Get Report , up 29% this year, saying her thesis has not changed in the wake of the tragic terroists attacks on Paris on Nov. 13. She liked the defense contractor's prospects before and she still likes them.

"The budget got passed so we know what defense spending is going to be," said Kempler. "International geographies are spending in increased amounts, plus they are exposed to the high growth areas of government spending, like cyber-security and unmanned vehicles."

Similarly, she said Raytheon (RTN) - Get Report , up 18% so far this year, will benefit from increased military spending and is "in the right geographies."

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