Home Depot Builds Fortunes In Far East
By: 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.
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.
