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Shares of Atlanta-based Home Depot and its chief home improvement retail competitor, Lowe’s, got a lift Friday following favorable analysts’ reassessments of their stocks ahead of next week’s earnings reports.
Lowe’s will report fourth-quarter results on Monday and Home Depot on Tuesday.
Home Depot was the biggest gainer Friday, rising nearly 2 percent to close at $65.58, up $1.20 on the New York Stock Exchange. Mooresville, N.C.-based Lowe’s closed at $37.67, unchanged after reaching an intraday high of $38.12. Both stocks are trading a few dollars shy of their 52-week highs.
The recent uptick in homebuilding and home improvements by consumers is expected to continue after lackluster activity in recent years.
Analysts at Oppenheimer recently raised their stock ratings on Home Depot and Lowe’s to “outperform” from “perform.”
“Data suggest that consumer spending continues to hold up well,” the analyst group said. The more consumers spend, the more money the retailers make, the better the outlook for investors.
UBS analysts on Friday reported the home improvement recovery is still in its “early innings,” according to a report by 24/7 Wall St. “Analysts think both Home Depot and Lowe’s have a lot of earnings-per-share power, and they are confident both retailers still have plenty of room to run on the road to peak earnings,” the report said.
Analysts at Jefferies raised their price targets but maintained a “hold” rating on the stocks. And Stifel Nicolaus downgraded Home Depot to “hold” from “buy,” concluding, like Jefferies, that any benefit from the improving sector has already been factored into valuations.
Stifel Nicolaus said Home Depot was upgraded to a “buy” in 2007 “too early” and says its downgrade is “based on valuation and a potential ‘leveling off’ of housing-market improvement. The analysts say Home Depot still is “among the best-managed and most-protected businesses” Stifel Nicolaus follows.