The bull case for Dow stock Home Depot ahead of earnings next week

Home Depot is set to report quarterly earnings Tuesday before the market opens, and one portfolio manager is bullish on the stock ahead of the report.

The shares have surged 32 percent in the last year, though have declined a little more than 1 percent in 2018. Mike Binger, senior portfolio manager at Gradient Investments, likes the stock here even as others may be concerned about Home Depot's do-it-yourself-centric business in a rising rate environment. Here are his reasons why.

• Interest rate concerns are relatively benign at this point, and rates are not yet high enough to negatively impact Home Depot and its peers or housing turnover.

• Home Depot will likely see earnings come in above estimates; analysts are expecting earnings per share of $1.62, according to FactSet data.

• A healthy consumer is a bullish sign for Home Depot, and recent consumer data have been relatively strong. The University of Michigan's monthly consumer sentiment survey reflected a strong reading Friday morning, coming in above economists' expectations.

Bottom line: Binger is bullish on Home Depot ahead of its earnings report due to a healthy consumer and benefits from tax reform.

Disclosure: Mike Binger's firm owns Home Depot stock.

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