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Stock Analyst Update

Rocky Road Ahead for Home Depot Shares

Latest earnings release is good but not good enough.


Even though Home Depot (HD) continues to execute on its aggressive expansion plans, its stock, which currently trades at about $55, leaves no room for error. Investors would do well to hold off on buying until the stock falls below $50.

Home Depot released results Tuesday for the quarter ended July 30 that met analyst expectations of $0.36 cents a share. The gains were driven by 41 store openings in the quarter and improved gross margins owing to better supplier sourcing and an expanded tool-rental program. But although sales grew 22% to $12.6 billion, they were a bit softer than expected. Last quarter, sales grew 24%, and investors were expecting as much this quarter.

Mark Sellers does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.