Wednesday November 14, 2012
by Leo Fasciocco, editor Ticker Tape Digest
Our latest featured breakout stock is Home Depot (HD), which broke out from a seven-week flat base, carrying the stock to a 13-year high.
The stock's push higher came against a weak stock market and was triggered by better than expected earnings.
HD reported net from operations for the fiscal third quarter ended October came in at 74 cents a share, excluding a special item.
That topped the Street estimate of 70 cents a share and also the highest estimate of 72 cents a share. A year ago, HD earned 63 cents a share.
For the upcoming fiscal fourth quarter ending January of 2013, analysts predict a 21% gain in net to 60 cents a share from 50 cents a year ago. The highest estimate on the Street is at 65 cents a share.
The company is benefiting from good demand and the recent storms in the East. And we see good chances for an upside earnings surprise.
This fiscal year ending in January of 2013 analysts are forecasting a 20% jump in net to $2.97 a share from$2.47 a year ago. The stock sells with a price-earnings ratio of 21. We see that as reasonable.
Going out to fiscal 2014, the Street is calling for a 14% improvement in net to $3.39 a share from the anticipated $2.97 this fiscal year.
Over the last 12-months, the stock has appreciated 52% versus a 15% gain for the S&P 500 index. The stock has been a very good big cap play.
Technically, HD trending higher from 46 back in June to a peak near 63 in October. It then set up a flat base.
The basing work was done above a rising 50-day moving average line showing the stock is in a strong up trend. The breakout comes with a gap move. The expansion in volume shows good institutional buying.
The stock's momentum indicator is strongly bullish and the accumulation - distribution line has been trending higher overall for the past few months.
Overall, we see HD as a conservative big cap play. We are targeting the stock for a move to $71. A protective stop can be placed near $59.70.
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