Home Depot

Home Depot Holds Up Despite Awful Results

The Home Depot (HD) declined a mere $0.37 in trading yesterday despite reporting awful results. Same store sales were down 6.6% for the quarter and in one month were down 11%--that is pretty bad.

However, despite these tough results, management appeared to be confident that the weakness is manageable and measurable. It appears the worst might be hitting Home Depot currently and the poor operating performance could bottom in the first half of 2007.

While Home Depot's supply business rolled over, the real concern appears to be its decision to enter the electronics appliance business. Home Depot mentioned this business was very disappointing. This could be a business line they exit.

Due to the relatively good stock performance following such awful results, investors need to start looking at this stock again. Home Depot will most likely be a Fed stock -- meaning when there is enough evidence that the Fed might start dropping rates, Home Depot stock might be off to the races.

The other thing to look for is a bottoming in its same store sales decline.