No Let Up in Home Depot's Merchandising Prowess

Wide-moat

We plan to raise our $158 fair value estimate by a mid-single-digit percentage to account for a lower than previously anticipated tax rate (at 26% versus 28% prior), and cash earned since our last update, leaving shares modestly overvalued. Additionally, we expect to increase our 2018 estimate closer to management's guided estimate of $9.31, as we account for the 53rd week in the company's fiscal year with incremental sales and profits (set to accounting for an extra $1.6 billion and sales and $0.19 in EPS) helping boost cost leverage in the period. Longer term, we are maintaining our outlook for 3% comp growth, 4% sales growth, and operating margins that reach 16%, as the housing market normalizes bound by the rising interest-rate environment.

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