The Zacks Analyst Blog Highlights: Home Depot, Lowe's, Wal-Mart Stores, Target and Costco Wholesale
CHICAGO, Sept. 17, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include The Home Depot Inc. (NYSE:HD), Lowe's Companies Inc. (NYSE:LOW), Wal-Mart Stores Inc. (NYSE:WMT), Target Corp. (NYSE:TGT) and Costco Wholesale Corporation (Nasdaq:COST).
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Here are highlights from Friday's Analyst Blog:
Home Depot to Close Some Stores
The sluggish global economy compelled the world's largest home improvement retailer, The Home Depot Inc. (NYSE:HD) to come up with the decision of closing down its remaining seven big box stores in China. However, the company will operate in the country through its two specialty stores and e-commerce facility. This action is going to affect approximately 850 associates of the company.
Home Depot is anticipating incurring an after-tax charge of about $160 million or 10 cents per share towards store closure expenses, lease termination, impairment of goodwill and other assets. Further, excluding the abovementioned charges, the company continues to expect earnings per share of $2.95 in fiscal 2012. It will continue to employ nearly 170 associates in China for its sourcing offices and specialty stores.
During late 2006, Home Depot made its first ever global presence by acquiring the twelve-store Chinese retail chain – The Home Way. The company lately realized that China is a do-it-for-me market and not a do-it-yourself market. Consequently, Home Depot has now adjusted its business concept accordingly. Home Depot believes that the new store format and e-commerce websites are made according to the Chinese customers' needs and preferences.
Lately, Home Depot reported a better-than-expected financial result for the second-quarter of fiscal 2012. The company's earnings for the quarter came in at $1.01 per share, climbing 17.4% from the prior-period earnings of 86 cents, primarily driven by comparable-sales growth and strong operating performance. Moreover, net sales inched up 1.7% to $20,570 million compared with $20,232 million in the prior-year quarter.
Our Recommendation
Home Depot is a leading player in the highly-fragmented home improvement industry. The company has implemented significant changes to its store operations to make these simpler and more customer-friendly. In addition, the company has reinvigorated itself with a shift in focus from new square footage growth to maximization of productivity through its existing store base. We believe these initiatives will induce more customer traffic to its stores while boosting its top line.
Moreover, with the introduction of new warehousing and transportation system, the company has been able to improve its supply chain while minimizing cost. Further, this has facilitated Home Depot to improve its Central Automated Replenishment System for immediate refilling of stock while reducing its investment in inventory.
However, the company's business is highly competitive, primarily based on customer services, price, store location and assortment of merchandise. It faces stiff competition from local, regional and international players as well. To maintain its market share, the company is making selective acquisitions and strategic alliances with third parties, which are increasing its operational risks.
Home Depot, which competes with Lowe's Companies Inc. (NYSE:LOW), currently has a Zacks #2 Rank, implying a short-term Buy rating.
Wal-Mart's Solar Inititative ExpandsThe leading grocery chain Wal-Mart Stores Inc. (NYSE:WMT)has come up with its largest solar installation Buckeye distribution center near Phoenix in Arizona, which will generate up to 5.3 million kilowatt hours of renewable energy per year. The amount of energy generated has the capability of providing power to more than 400 homes.
The distribution center has 14,000 solar panels on a 1,000,000 sq. feet building and parking canopies which will produce approximately 30% of the center's energy needs.
The new facility at Buckeye distribution center is the second solar project in Arizona by Wal-Mart and came just a year after a 2 megawatt project in Casa Grande, Arizona. The installation was done in partnership with SolarCity, which installs, owns and maintains solar power systems for Walmart.
The company has more than 180 renewable ongoing energy projects around the world, capable of producing energy that can power 78,000 American homes annually. These renewable energy projects include solar rooftops, micro-wind on parking lots, biodiesel generators and fuel cells.
The company recently unveiled the addition of a 1 megawatt wind turbine at its Red Bluff distribution center in California. Wal-Mart also partnered with SolarCity in September 2011 to install solar-power panels in more than 60 stores in California and Colorado. SolarCity has installed solar power panels at Wal-Mart stores in California, Arizona and Colorado.
Walmart is working towards its goal of achieving energy self sufficiency via power generated from its renewable power generation sources. We believe that Walmart has got a good opportunity to expand and accelerate its solar power initiative program in the U.S. In addition to creating jobs and protecting the environment, these solar projects have also reduced costs for businesses by lowering power bills.
Walmart's second quarter fiscal 2013 earnings of $1.18 were ahead the Zacks Consensus Estimate by a penny and also increased 8% year on year. Total revenue increased 4.5%, driven by positive same store sales, which were driven by improved traffic and product offerings.
We currently have a Neutral recommendation on Walmart, which faces stiff competition from Target Corp. (NYSE:TGT) and Costco Wholesale Corporation (Nasdaq:COST). Wal-Mart currently has a short-term Zacks #3 Rank (Hold rating).
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