Stock Picks: Home Depot, Kraft, RadioShack, Nordstrom

Wall Street analyst opinions on stocks making headlines in Tuesday's market

Home Depot Inc.: Bank of America Merrill Lynch analyst Alan Rifkin reiterated a buy rating on shares of Home Depot Inc. (HD) on Feb. 23 after the largest U.S. home-improvement retailer reported a fourth-quarter profit that topped analysts' estimates and raised its dividend for the first time since 2006.

On Feb. 23, Home Depot said net income totaled $342 million, or 20 cents a share, in the three months ended Jan. 31, compared with a loss of $54 million, or 3 cents, a year earlier. Excluding some items, earnings were 24 cents a share, above the 16 cent average of 25 estimates compiled by Bloomberg.

Rifkin said in a note that the company's earnings per share excluding items were 9 cents ahead of his 15 cents estimate, and above the company's earlier guidance of 13 cents. He noted that gross margin increased 32 basis points to 34.41%, while the company's earnings before interest and taxes (EBIT) margin increased 52 basis points to 4.99%.

Rifkin said Home Depot posted same-store sales growth of 1.2%, vs. his -4% estimate. , marking the first positive comparison since the first quarter of 2006. He estimates that store traffic increased 2.9%, while the average sales ticket declined 1.7%, to $50.01.

The analyst said Home Depot management expects 2010 earnings per share (EPS) of $1.79, a 15.5% increase, with same-store sales growth of 2.5%. Reflecting better-than-expected fourth-quarter results and the company's 2010 outlook, Rifkin raised his EPS estimates for 2010 to: $1.79 from $1.75; for 2011 to $2.12 from $2.00; and for 2012 to $2.35 from $2.25.

The analyst said Home Depot remains one of his top picks for 2010. He has a $35 price target on the stock.

Kraft Foods Inc.: Credit Suisse analyst Robert Moskow said on Feb. 23 that the firm was reinstating coverage on shares of Kraft Foods Inc. (KFT) with an outperform rating.

In a note, Moskow said he was forecasting EPS of $2.15 for 2010 and $2.45 for 2011, both above the respective Wall Street consensus estimates of $2.10 and $2.31. The analyst said he finds "the risk-reward attractive because of potential upward momentum in operating margins over the next 12 months fueled by acquisition synergies". Kraft is in the process of acquiring British confectioner Cadbury.

"Kraft plus Cadbury is now a $50 billion company with much more scale and exposure to developing markets," the analyst wrote.

Moskow has a price target of $35 on the shares.

Business Exchange

Track and share business topics across the Web.