Home Depot (NYSE:HD) – This home improvement retailer rose from under $28 to over $38 since August, based on excellent Q2 earnings of 86 cents versus a consensus of 83 cents. Higher gross profit margins and better expense leverage contributed to the quarterly success.
HD reported Q3 earnings this morning of 60 cents versus an estimate of 58 cents. Same-store sales were up 4.2% versus a 3.8% estimate, and the company raised its full-year estimated earnings to $2.38 from $2.34. It also increased its dividend by 4 cents per quarter to $1.16 for a current 3% dividend yield.
Credit Suisse analysts consider HD to be undervalued “by a significant margin.”
Technically, if the stock can break the broad resistance at just above $38, look for a quick run to the mid- to high $40s.