New York, NY, July 11--Home Depot Inc., the home improvement retailer, has made some improvements in its own house, making it a "far better" company than last year, according to Banc of America Securities LLC.
The Atlanta company's comparative sales levels for the second quarter are already in positive territory, according to analyst Aram Rubinson, who upgraded Home Depot shares to buy from neutral.
Home Depot has corrected merchandising missteps and is a "better operating company than it has been in years," the analyst said. Among the moves it made was to improve staffing and inventory practices.
"We are not often impressed by housekeeping standards in retail stores," Rubinson said in a research report. "But to the extent that Home Depot can keep some of its highest volume stores up to spec means that store level processes are working better."
The analyst said Home Depot's Achilles' heel is its information technology system, "among the worst in retailing," he said.
Although it will take years for the company to be up to par with its retailing peers, citing improvements in ordering systems, Rubinson detects progress. The analyst also praises Home Depot Chief Information Officer Bob DeRhodes as making "significant 'incremental' progress, while plugging up other holes using every one of his ten fingers."
The analyst said he regrets that his recent bearishness prevented him from missing the stock's gains from the bottom. But Rubinson believes "every day is a new day" and that the "stock is still cheap."
Rubinson owns no Home Depot shares, according to a disclosure statement, but Banc of America has a recent history of investment banking with the company.
Today the stock is trading at low levels compared with 2003 and 2004 earnings estimates, the analyst said. "Since Home Depot is likely to exceed Street estimates for '03, it is not too early to be looking at next year."
For the company's fiscal year 2003, which ends in January 2004, analysts expect earnings of $1.73 a share, up from $1.56 a share a year earlier, according to the analyst consensus estimate, compiled by Thomson First Call. Banc of America is looking for profits of $1.75 a share.
