The Bellwether Home Depot (NYSE: HD) to Report Earnings

Depending on which of the dozens of Market "experts" on whom you rely for swami-like predictions, there will be no sustainable recovery from this Great Recession until the housing market improves.  Others point out that improvement in unemployment is a necessary precursor to housing recovery, as people who have either lost their jobs or are fearful of losing them are unlikely to buy new homes or make substantial improvements in their existing homes.  Still others point to dismal consumer sentiment data as evidence the consumer is holding tight to the wallet.

By the very nature of its business, The Home Depot, Inc. (NYSE:HD) can be seen as a "bellwether" stock for any of these market trends.  They sell building materials for new and existing homes as well as a variety of other consumer related products, such as household and industrial cleaning supplies, Christmas decorations, and gardening supplies. Some recent data from Home Builders like Toll Brothers, Inc. (NYSE:TOL) provide some encouragement that housing is indeed rebounding.  And when it comes to interpreting consumer sentiment data from the likes of the famed University of Michigan Survey, know that there is frequently a disconnect between what people say and what they do.  So while sentiment numbers are horrible, consumer buying behavior is continuing to defy analysts dire predictions.  Retail sales rose in the month of October more than anticipated.

Analysts expect The Home Depot, Inc. (NYSE:HD) to report top line revenues of 16.29 billion with earnings of .36 per share.  While this would represent a 20% decline in earnings year over year, HD could surprise the market as they have beaten consensus forecasts for the past four quarters, and they have beaten them easily.  Many experts feel that analysts are a bit "gun shy" from having completely missed the crash and are now being overly conservative.

Right now HD is trading near its 52 week high of 28.44, at around 27.  Nothing jumps out at you as you look at HD's technical indicators at this time, but the recent decline in short interest bears mentioning.  Shorting has dropped from over 58 million shares in mid-June to 38 million shares at the beginning of November.   While an encouraging trend for those who hold long positions in HD, it does reduce the possibility of that joyous event eagerly anticipated by all longs -- the short squeeze.  In closing, if you like to follow analyst recommendations, right now there are 12 with buy or strong buy ratings (11 are actually strong buy) with 8 at hold ratings and only 2 with sell ratings.