Will This Target Price Reduction Hurt Home Depot (HD) Today? (Update)

Update (9:40 a.m.): Updated with Thursday market open information.

NEW YORK (TheStreet) -- Wedbush reduced its target price on Home Depot  (HD) to $78, reduced its estimates and set a "neutral" rating. The firm cited slowing housing trends as the reason for the change.

The stock was falling 0.65% to $82.37 at 9:40 a.m. on Thursday.

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Separately, TheStreet Ratings team rates HOME DEPOT INC as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate HOME DEPOT INC (HD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, notable return on equity, good cash flow from operations, increase in stock price during the past year and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • HOME DEPOT INC has improved earnings per share by 7.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HOME DEPOT INC increased its bottom line by earning $3.75 versus $3.00 in the prior year. This year, the market expects an improvement in earnings ($4.43 versus $3.75).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, HOME DEPOT INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $1,647.00 million or 3.51% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -7.83%.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 5.5%. Since the same quarter one year prior, revenues slightly dropped by 3.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: HD Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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