Home Depot Raises Profit Forecast, Shares Jump

Home Depot raised its 2009 profit forecast and stood by its sales expectations Wednesday ahead of a meeting with analysts and investors, sending its shares up nearly 4 percent.

The world's largest home improvement retailer, which has been grappling with the economic downturn and a depressed housing market, expects 2009 earnings per share from continuing operations to be flat to down 7 percent from last year, compared with its previous forecast of a 7 percent decline.

Based on a 2008 profit of $1.37 per share,, that means of a forecast of $1.27 to $1.37, compared with the average Wall Street estimate of $1.33 On an adjusted basis, it expects earnings per share from continuing operations to fall by 20 percent to 26 percent, compared with its previous forecast of a 26 percent decline.

That yields a forecast of $1.32 to $1.42 a share, compared with the Reuters estimate of $1.41 and last year's profit of $1.78.

Home Depot
Home Depot

Home Depot still expects sales to fall by about 9 percent this year, with sales at stores open at least a year down in a high-single digit range. It expects gross margins to be flat to slightly higher.

The company said it should be able to achieve an operating margin of about 10 percent and a return on invested capital of about 15 percent over the long term, helped by improvements in customer service, products, productivity and efficiency and a revival in the home improvement market.

It did not provide a time frame for that long-term operating target.

Home Depot has been upgrading service and products in its stores to win back market share from rival Lowe's.

Earlier this year, Home Depot announced plans to freeze officers' salaries and close certain specialty outlets to save money in the recession and prolonged U.S. housing slump.

The Atlanta-based company, which shed about 7,000 jobs earlier this year, cut operating expenses 16.4 percent in the first quarter, which ended on May 3.

Shares of Home Depot jumped to $25.29 in pre-market trading after closing at $24.35 on Tuesday.

Lowe's shares had not traded.