Home Depot Builds Fortunes In Far East

Wednesday, 13 Dec 2006 | 4:31 PM ET

Home Depot is eager to break down a Great Wall - and build it’s fortune in China. Today, the company secured agreements from Beijing to buy HomeWay, one of China's top home-improvement retailers. Shares jumped about 1% on the move. On CNBC’s “Closing Bell,” Dylan Ratigan examined just how quickly the Atlanta-based retailer can turn a profit on that play.

Home Depot in China
Home Depot announced it has secured agreements from Beijing to by Homeways, China's number one home improvement retail chain. Alan Rifkin, Lehman Brothers Retail Analyst; Brian Nagel, UBS Analyst; and CNBC's Dylan Ratigan discuss whether now is a good time buy Home Depot.

Michael Farr, managing director at Farr Miller & Washington, said China is very important to Home Depot strategically. "I think it could impact earnings in about five years," he says. "Given what they've done in Canada and Mexico - I think it could impact earnings in a significant way. And Lowe's isn't there - so Home Depot wins this one."

Brian Nagel, retail analyst at UBS, still anticipates weakness in the stock. "I think China will be a significant driver [in the long term], but in the near term my concern with Home Depot is the U.S. housing market. I don't think we've seen the end of the weakness there."

Farr added that he thinks Home Depot can achieve 10% annual earnings growth over the next few years and sustain that. "I've been watching what they've done to diversify their business lines," he says, "and I think they have less risk and a stronger balance sheet than Lowe's."

Analyst disclosure: Michael Farr owns a 250,000 shares of HD. Brain Nagel owns shares of HD and LOW.

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  • With almost 30 years experience in business television, Bill Griffeth is co-anchor of the 3 p.m. ET hour of CNBC's "Closing Bell."

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    Kelly Evans is an on-air correspondent, reporting across CNBC's business day programming. She is co-anchor of CNBC's "Squawk on the Street."