DJIA 9171.48 +116.83 (+1.29%) S&P 500 1119.06 +9.54 (+0.86%) Nasdaq 1831.76 -14.11 (-0.76%) Value Line ndx 971.06 -0.19 (-0.02%) 30-Year Bond 103 6/32 +17/32 5.89% Yield
AT&T <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: T)") else Response.Write("(NYSE: T)") end if %> rang up $2 7/16 to $58 7/8 after the largest U.S. long-distance company revealed it has contacted five regional Bells and GTE Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTE)") else Response.Write("(NYSE: GTE)") end if %> seeking to reach agreements whereby the local phone companies would sell AT&T long-distance services to their customers. This comes on the heels of recent announcements by Baby Bells U.S. West <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: USW)") else Response.Write("(NYSE: USW)") end if %> and Ameritech <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIT)") else Response.Write("(NYSE: AIT)") end if %> that they have agreed to market Qwest Communications' <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: QWST)") else Response.Write("(Nasdaq: QWST)") end if %> long-distance services. AT&T, along with MCI Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %>, sued to block the Qwest agreements as violations of the Telecommunications Act of 1996, but when a judge declined to issue a temporary restraining order, AT&T decided to form its own alliances. The company also said it is "very interested" in buying MCI's wholesale Internet operations. At AT&T's annual meeting, CEO Michael Armstrong vowed to grow the company, adding that he expects to double last year's growth rate this year to more than 3%, and then to double that figure next year. Morgan Stanley Dean Witter reiterated its "strong buy" rating on the company.
Nifty gadget retailer and catalog company The Sharper Image <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SHRP)") else Response.Write("(Nasdaq: SHRP)") end if %> jumped $1 9/16 to $7 15/16 after announcing plans to re-launch its sharperimage.com website next month to further increase sales via the Internet. The company said sales from its website doubled in each of the past two years and are showing triple-digit growth this year. Starting in June, The Sharper Image will promote its website on the cover of its catalog. This new emphasis signals a "fundamental shift in strategy" for the company as it implements plans to "dramatically" increase sales on the Internet, which will expand its reach worldwide far faster than through catalog mailings and new store openings. The company said that its website re-launch will make it easier for consumers to shop online for such must-have products as a 24-karat gold-plated kazoo and a Star Wars Darth Vader helmet.
QUICK TAKES: McDonald's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %> gained $3 1/16 to $65 7/8 on reports that the fast food giant's CEO Jack Greenberg said he expects a "very strong'' second quarter, reflecting "strong improvement'' in U.S. sales... Chrysler <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %> sped ahead $1 1/2 to $53 1/2 after The Wall Street Journal's "Heard on the Street" column reported that shares of the nation's No. 3 automaker, at $52, have stalled about $10 below the $60 to $62 value range that many analysts estimate shareholders will receive as soon as September... PepsiCo <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PEP)") else Response.Write("(NYSE: PEP)") end if %> fizzed up $2 9/16 to $40 1/2 as new data showed that growth of its Frito-Lay snack division is on track and concerns of a potato shortage may have been overblown. Merrill Lynch reiterated its short- and long-term "buy" ratings on the company...
Investment bank Bear Stearns <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BSC)") else Response.Write("(NYSE: BSC)") end if %> jumped $3 1/8 to $56 on reports that it is in talks to be acquired by Dutch bank ABN AMRO <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AAN)") else Response.Write("(NYSE: AAN)") end if %>. Reuters reported that a spokesman at ABN AMRO dismissed the reports as "nonsense"... Merger partners NationsBank <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NB)") else Response.Write("(NYSE: NB)") end if %> and BankAmerica <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BAC)") else Response.Write("(NYSE: BAC)") end if %> moved up after unveiling a $350 billion, 10-year community lending program. This comes on the heels of a recent announcement by merger partners Citicorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %> and Travelers <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRV)") else Response.Write("(NYSE: TRV)") end if %> of an $115 billion, 10-year community and small business lending program. NationsBank was up $1 9/16 to $77 1/2 while BankAmerica gained $2 3/16 to $85 7/16. Citicorp added $3 1/16 to $158 9/16 and Travelers rose $1 5/16 to $64 7/8 after saying it expects the new combined company to cash in on cross-selling products.
Baby Bell SBC Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SBC)") else Response.Write("(NYSE: SBC)") end if %> gained $2 to $39 9/16 after telling a Senate subcommittee that after it merges with Ameritech Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIT)") else Response.Write("(NYSE: AIT)") end if %>, it plans to spend several billion dollars a year over a decade to expand its market to include cities such as Seattle, Boston, New York, and Washington, D.C., and to serve both residential and business customers on a national basis... Airlines took off today as the price of crude oil futures dropped below $13 a barrel to a near-decade low. Fuel is an airline's largest expense after labor costs. United Airlines parent UAL Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %> added $1 5/16 to $81 5/16; American Airlines parent AMR Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMR)") else Response.Write("(NYSE: AMR)") end if %> rose $1 7/16 to $147 5/16; Delta Air Lines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DAL)") else Response.Write("(NYSE: DAL)") end if %> gained $1 1/2 to $111 3/4; and Continental Airlines <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CAI.B)") else Response.Write("(NYSE: CAI.B)") end if %> was lifted $1 3/4 to $58.
Upscale retailer Nordstrom <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NOBE)") else Response.Write("(Nasdaq: NOBE)") end if %> charged up $4 3/4 to $72 5/8 after announcing a 2-for-1 stock split to be distributed on June 30. The company also declared a pre-split $0.14 per share dividend payable on June 15... Department store operator Kohl's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KSS)") else Response.Write("(NYSE: KSS)") end if %> rang up $1 3/8 to $45 5/16 after reporting Q1 EPS of $0.17, up from $0.10 in the year-earlier period... Kmart <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KM)") else Response.Write("(NYSE: KM)") end if %> gained $7/8 to $19 1/4 after Merrill Lynch raised its long-term rating on the discount retailer to "buy" from "accumulate," while keeping its short-term "buy" rating... Wireless communications products wholesaler and retailer CellStar Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLST)") else Response.Write("(Nasdaq: CLST)") end if %> tacked on $2 to $31 3/4 after announcing a 2-for-1 stock split.
Medical products manufacturer Becton, Dickinson & Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BDX)") else Response.Write("(NYSE: BDX)") end if %> rose $2 3/4 to $72 1/4 after announcing it will take Q3 pretax restructuring charges of around $120 million to make its operations more efficient while maintaining 15% EPS growth... Swedish telecommunications equipment company Ericsson <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ERICY)") else Response.Write("(Nasdaq: ERICY)") end if %> added another $2 to $55 3/4 after announcing a 2-for-1 stock split for its Class A and B shares. Each American depositary receipt equals one B share... Biopharmaceutical company NeoTherapeutics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NEOT)") else Response.Write("(Nasdaq: NEOT)") end if %> surged $9 11/16 to $19 1/4 on a published report in which the company's CEO discussed memory improvements among patients in its trial of its experimental treatment for Alzheimer's disease.
Pharmaceutical product detailing company Professional Detailing <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PDII)") else Response.Write("(Nasdaq: PDII)") end if %> jumped $5 5/8 to $21 5/8 from an initial offering price of $16 a share... Vacation rental and properties management company ResortQuest International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RZT)") else Response.Write("(NYSE: RZT)") end if %> made quite a debut today, gaining $4 1/2 to $15 1/2 from an initial offering price of $11 per share... Internet services provider down under OzEmail Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OZEMY)") else Response.Write("(Nasdaq: OZEMY)") end if %> moved up another $2 1/4 to $23 after its announcement of plans to list on the Australian Stock Exchange due to heightened interest from investors... US LEC Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CLEC)") else Response.Write("(Nasdaq: CLEC)") end if %> climbed $1 to $23 5/8 after Wheat First Union rated the local phone company a "buy" in new coverage and projected that its shares will hit $30 in 12 months.
Internet sports information provider SportsLine USA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPLN)") else Response.Write("(Nasdaq: SPLN)") end if %> was cut $4 1/8 to $26 5/8 after that company and News Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NWS)") else Response.Write("(NYSE: NWS)") end if %> Fox Sports Online lost a bidding war for the rights to produce the National Football League's website to Disney's <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DIS)") else Response.Write("(NYSE: DIS)") end if %> ESPN SportsZone. ESPN paid at least $10 million for the rights, according to Bloomberg News. The deal sets the stage for an all-out online sports service hype-war when NFL teams return to the gridiron on Sept. 6. ESPN SportsZone will likely receive some promotion from Disney's ABC TV network during its popular Monday Night Football broadcasts. Meanwhile, CBS Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CBS)") else Response.Write("(NYSE: CBS)") end if %>, which in January won back the right to televise NFL games, owns a minority stake in SportsLine and has promised to devote $57 million in TV promotion to the site through 2001.
Analog Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ADI)") else Response.Write("(NYSE: ADI)") end if %>, which makes integrated circuits for analog and digital signal processing (DSP) chips, was crushed $6 1/8 to $27 5/8 after reporting fiscal Q2 EPS of $0.28 versus $0.25 a year ago, missing the Street estimate of $0.32. Net sales in the period increased 10.7% to $333 million compared with last year, but rose by less than 1% sequentially. Selling, marketing, general, and administrative costs were above plan during the quarter and will be constrained in the second half of the year, the company said. President and CEO Jerald Fishman expects Q3 revenues will come in "flat to up a few percent" from Q2 due to the uncertain outlook for the chip sector. "This scenario would likely produce third quarter earnings per share relatively flat to the second quarter, with some improvement during the fourth quarter," he added.
QUICK CUTS: PanAmSat <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SPOT)") else Response.Write("(Nasdaq: SPOT)") end if %>, the only commercial satellite company providing global coverage, was down $1 3/4 to $55 3/4 after navigational tools controlling its Galaxy IV satellite malfunctioned and the three-axis bird rotated away from its fixed position relative to the earth, resulting in signals bouncing into space rather than back down to earth where they belong... Mellon Bank Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MEL)") else Response.Write("(NYSE: MEL)") end if %> lost $2 to $68 after the Bank of New York <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BK)") else Response.Write("(NYSE: BK)") end if %> formally withdrew its $24 billion bid for the Pittsburgh-based bank. The decision was made after Mellon executives refused to meet with their Bank of New York counterparts yesterday... Number-one direct PC marketer Dell Computer <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DELL)") else Response.Write("(Nasdaq: DELL)") end if %> fell $2 27/32 to $91 3/4 after yesterday reporting Q1 EPS of $0.44, which was $0.02 ahead of the First Call mean estimate. Competitor Gateway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GTW)") else Response.Write("(NYSE: GTW)") end if %> was also down today, losing $3 1/8 to $47.
Several chip makers drifted lower today following Analog Devices' earnings shortfall. Chip granddaddy Intel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %> dropped $2 9/16 to $77, National Semiconductor <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NSM)") else Response.Write("(NYSE: NSM)") end if %> slid $1/2 to $16 1/4, Texas Instruments <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TXN)") else Response.Write("(NYSE: TXN)") end if %> stumbled $1 15/16 to $56 3/8, and Advanced Micro Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AMD)") else Response.Write("(NYSE: AMD)") end if %> slumped $1 3/4 to $20 5/8. Metal-oxide chip maker Atmel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATML)") else Response.Write("(Nasdaq: ATML)") end if %> lost $11/16 to $16 3/8 and Altera Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALTR)") else Response.Write("(Nasdaq: ALTR)") end if %> fell $1 5/16 to $37 1/4... Restaurant operator Cracker Barrel Old Country Store <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CBRL)") else Response.Write("(Nasdaq: CBRL)") end if %> was thrown for a $3 9/32 loss to $32 5/8 after reporting Q3 EPS of $0.39, which was in line with the Street's mean estimate... Enterprise software developer Computer Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CA)") else Response.Write("(NYSE: CA)") end if %> lost $1 7/8 to $54 5/8 after reporting fiscal Q4 EPS of $0.75 (excluding a $33.8 million charge), which was a penny above the Street estimate.
Brylane Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BYL)") else Response.Write("(Nasdaq: BYL)") end if %>, owner of the Lane Bryant, Lerner, and Chadwick's of Boston catalogs, sank $4 7/8 to $53 1/8 after reporting Q1 EPS of $0.73, which was in line with the Street estimate... Satellite communications firm Loral Space & Communications <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOR)") else Response.Write("(NYSE: LOR)") end if %> slipped $1 9/16 to $26 7/16 on continuing concern regarding possible connections between alleged illegal campaign contributions from the Chinese military to the Democratic Party and the launching of Loral's satellites on Chinese rockets... Power generation and marine construction equipment maker McDermott International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDR)") else Response.Write("(NYSE: MDR)") end if %> sank $2 1/2 to $38 3/4 after reporting Q4 EPS of $0.25, which was in line with the Street's estimate.
Neurological medical device maker Cyberonics Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYBX)") else Response.Write("(Nasdaq: CYBX)") end if %> dropped $1 to $14 13/32 after its CEO said he expects "little, if any" sequential revenue growth in the fiscal fourth quarter since the expansion of its U.S. marketing and sales staff reached capacity during the third quarter... Fabric wholesaler Hancock Fabrics <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HKF)") else Response.Write("(NYSE: HKF)") end if %> was ripped $1 9/16 to $12 7/8 after reporting Q1 EPS of $0.10, missing the Street's estimate by $0.02... Interactive entertainment software firm MicroProse Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MPRSD)") else Response.Write("(Nasdaq: MPRSD)") end if %> slid $3/4 to $6 1/4 after reporting a Q4 loss of $2.13 per share. The company's board has authorized management to explore "strategic alternatives," which may include a business combination with another firm or an outside investment.
Remote access networking products maker SBE Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SBEI)") else Response.Write("(Nasdaq: SBEI)") end if %> slid $1 3/4 to $4 9/16 after reporting a fiscal Q2 loss of $0.09 per share versus a $0.15 per share profit a year ago. Order delays from the firm's two largest OEM customers were blamed for the loss...Enterprise application software firm BEA Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BEAS)") else Response.Write("(Nasdaq: BEAS)") end if %> was dumped $2 5/16 to $24 1/8 after agreeing to buy NCR Corp.'s <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: NCR)") else Response.Write("(NYSE: NCR)") end if %> Top End enterprise middleware technology for undisclosed terms.
FOOL
ON THE HILL
An Investment Opinion
by
Louis Corrigan
Home Depot Keeps Building
Last September, The Home Depot <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HD)") else Response.Write("(NYSE: HD)") end if %>, the nation's largest home improvement retailer, ended some embarrassing gender discrimination lawsuits by writing fat settlement checks. The problem cost $104 million in pre-tax income and cut reported earnings from $1.64 per share to $1.55 for FY97. Clearly, no shareowner likes to pay for management's poor judgment. Still, this regrettable episode has at least directed management's attention to a problem that, once resolved, will make the company stronger. It also highlights the fact that this category killer still has room to improve its business. Based on recent results, it's easy to forget that.
In a world of hot growth stories, Home Depot has managed to be boringly terrific. First quarter results announced yesterday offer a snapshot. Sales rose 26% to $7.12 billion while net income jumped 30% to $337 million. Earnings per share increased 29% to $0.45 from $0.35, easily beating the First Call consensus estimate of $0.42.
The revenue gains followed the steady store rollout. With 32 new stores opened during the quarter, Home Depot now has 656 stores overall, including six Expo Design Centers. The results also reflect the strong economy, which has boosted do-it-yourself (DIY) home improvement sales. In addition, warm April weather helped lawn and garden sales. Same-store sales vaulted 7% overall, or 11% if you back out those stores that saw revenues cannibalized by the opening of new stores nearby.
Net profit margins expanded to 4.73% from 4.58% a year ago thanks to an across-the-board improvement in operations. The company enjoyed higher gross margins (27.6% vs. 27.4%) due to product line reviews and improved merchandising. It experienced lower selling and store operating expenses (17.8% of sales vs. 17.97%) thanks partly to lower average advertising spending due to concentrating more stores in each market. Lower general and administrative expenses (1.7% of sales vs. 1.73%) also helped margins. Meanwhile, inventories rose more slowly than sales at just 23.4%.
And the outlook remains rosy. In yesterday's conference call, CEO Arthur Blank reiterated the company's long-term goal of increasing its number of stores by 21% to 22% a year. That would give the retailer 761 stores by year-end and over 1300 stores by the end of 2001. EPS should grow faster at 23% to 25% a year. After nearly doubling in the last year, Home Depot's stock trades at around 2.2 times the company's enterprise value and 36 times the current consensus EPS estimate of $2.03 for FY98 and 29 times FY99 estimates. However, there's reason to believe this price premium is justified and that long-term Home Depot investors -- who have enjoyed a fifteen-bagger during the '90s -- will continue to smile.
The key is that Home Depot is operated on the principle of aggressive but controlled growth. Through the late '80s and early '90s, the retailer was delivering revenue growth in the high 30% range, with earnings appreciating around 46% a year. As the firm gobbled up market share in the vast home improvement sector, such gangbuster gains weren't sustainable. The stock took a breather for several years beginning in late '92 as the market adjusted to that fact. But the stock has renewed its upward trajectory lately as investors have come to believe that annual EPS gains in the 24% range are sustainable. Two points stand out in an overview of Home Depot's outlook: huge untapped markets and the firm's absolute patience in finding a profitable means of tapping them.
CEO Blank puts the entire domestic building-related market at $365 billion. Of that, about $100 billion is DIY whereas the rest involves sales to professionals. Of the $265 billion professional market, about $50 billion involves heavy industry, leaving around $215 billion of home-related sales. Of that, Home Depot is targeting the $71 billion in sales to smaller professional customers who buy less than $200,000 of product annually. So Home Depot is addressing or looking to address a $171 billion U.S. market in which it's already the undisputed leader with around a 14% share. (Indeed, even in Atlanta and Dallas where its smaller rival Lowes <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LOW)") else Response.Write("(NYSE: LOW)") end if %> has come on strong, Home Depot sales remain ahead of plan.)
But that's just in the U.S. The company now owns all of its Canadian operations after recently acquiring the remaining 25% from Molson. Home Depot Canada has expanded from 7 stores in 1994 to 34 stores today, with another 8 to be opened by year end. This year, the company also plans to open its first store in Chile and another in San Juan, Puerto Rico. Yet that's the extent of its international biz. In other words, Home Depot today has the global presence of Coca-Cola <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> -- before World War II.
What's most intriguing and impressive is Home Depot's patience in addressing new markets. Rather than growth at any cost, the company simply won't roll out a new concept until management is sure the return on investment is in line with its current operations. Management will test a new platform literally for years until it's just right. Consider the Expo concept. These stores, designed around specific home improvement projects such as bathroom renovations, are smaller and more upscale than traditional Home Depots. Yet the first store, opened in San Diego in 1991, proved too cluttered. Six years later, the company finally opened its definitive Expo in Miami, only its fifth Expo store overall. About half of its merchandise sales come from special orders, a major departure from the firm's conventional cash-and-carry approach. Now that the financial model is in place, management plans to open 200 Expo stores over the next seven years.
Home Depot is also working on two promising new pilot programs. In Austin, it has been testing an initiative to cultivate more business from professionals. The next test site in Las Vegas should further refine the model, which depends mainly on enhancing customer service to foster and expedite transactions. This is a natural step since at least 75% of its potential professional customers already shop at Home Depot but buy just 10% to 15% of the products they use from the retailer.
The company is also developing a new convenience store about one-third the size of typical Home Depots. This concept is designed to target urban markets and compete in the $50 billion U.S. segment that includes traditional hardware stores. About a quarter of sales are expected to come from general merchandise items not currently sold in Home Depot stores. The concept is being led by senior VP Bob Wittman, formerly COO of Orchard Supply Hardware, a 69-store California chain acquired by Sears in 1996. Four test stores will open in the Northeast by the first quarter of 1999. A decision on rolling out the concept isn't expected until at least 2000. Therefore, the company's forward-looking sales and earnings targets don't include contributions from these convenience stores.
What does this all mean for investors? Making the optimistic but hardly outrageous assumption that Home Depot continues to deliver 24% earnings growth, an investor would be looking at estimates of $4.80 per share for fiscal year 2002. Valued at 30 times forward estimates, or a reasonable premium to its growth rate, the stock could trade up to $144 just four years from now. That's compound annual growth of 18.5% from here, no doubt a market-beating performance.
Please see the Motley Fool's Conference Calls page for call information and links to synopses.
WE
DELIVER - Get The Evening News delivered
to your e-mailbox every evening!
ANOTHER FOOLISH THING
See something moving a stock that we didn't cover?
E-mail the
Fool
News Team
and we will start working on the story.
Unfortunately, we cannot answer every e-mail
or respond to individual questions.
|
Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), Fool Two Alex Schay (TMF Nexus6), Fool, too Dale Wettlaufer (TMF Ralegh), Final Fool
Editing |