The Ratings Game: Home Depot’s big-ticket items are a hit with shoppers and analysts

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Home Depot Inc. said fourth-quarter results got a lift from sales of pricey items like appliances and vinyl plank flooring, prompting a number of analysts to raise price targets on the stock.

“During the fourth quarter, big-ticket comp transaction, or those over $1,000, which represent approximately 20% of U.S. sales, were up double digits,” said Edward Decker, executive vice president of merchandising at Home Depot HD, -0.88%, on the Tuesday earnings call, according to a FactSet transcript.

“The strength in our big-ticket sales was driven in part by the shift in our event timing as well as strong performance in a number of other big-ticket categories.”

The news boosted sentiment among already-upbeat analysts.

“Company keeps delivering,” declared the headline on a Stifel note.

“Some will quibble with the limited transaction growth, but do we want to rack up trash bag and ice melt sales or tickets over $1,000, which by the way were up over 10%!,” wrote analysts led by John Baugh. Comparable transactions were nearly flat during the quarter.

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Stifel rates Home Depot stock a buy and raised its price target to $270 from $245, or about 12.5% above its current price.

“We continue to see Home Depot as a best-in-class operator in the home improvement space and believe that the stock sets up well, as the company has set fiscal year guidance fairly conservatively and investors can look forward to an operating margin inflection in fiscal 2021 after a peak investment year in fiscal 2020,” wrote Raymond James analysts.

Raymond James rates Home Depot stock as outperform and raised its price target to $270 from $250.

Home Depot reported earnings and sales that topped estimates and raised its dividend by 10%.

For fiscal 2020, Home Depot expects sales and same-store sales growth of 3.5% to 4% and EPS of $10.45. The FactSet consensus is for sales of $114.7 billion, implying 4.1% growth; same-store sales growth of 4% and EPS of $10.56.

“Management maintained their 2020 outlook, but we believe the good January same-store sales results indicates an overall pickup in underlying demand and a healthy outlook for renovation spending,” wrote SunTrust Robinson Humphrey analysts.

Analysts there rate Home Depot stock as hold and raised their price target to $240 price target from $225.

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JPMorgan analysts are confident about Home Depot into the future, in part because it’s resistant to Inc. AMZN, +0.35% encroachment.

“While we are less bullish on the home improvement backdrop than many in the market, we see a supportive (albeit more moderate) backdrop and prefer the best in retail operator Home Depot and believe its investments are widening the competitive gap and enabling long-term share capture” across the business, analysts wrote.

JPMorgan rates Home Depot stock as overweight and lifted its price target to $260 price target from $241.

Home Depot shares have rallied 25% over the past year, outpacing the Dow Jones Industrial Average DJIA, -0.46%, which is up 3.5% for the period.

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