) fell after Jefferies downgraded the stock to hold from accumulate. Yesterday, the home-improvement retailer posted $0.36 first quarter EPS on 5% same store sales rise, on a 17% total sales rise.
Analyst Donald Trott says he wonders where the juice will come from after the company's many efficiency improvement steps have pretty much become embedded in its operating structure. In addition to the company-specific valuation concerns, he maintains the belief that valuation yardsticks for the entire retail sector will continue to erode. For those wishing to remain exposed to home center stocks, he advises switching to Lowe's (LOW
), whose shares he believes have superior upside potential vs. HD.
Trott maintained his EPS estimates of $1.57 in fiscal year 2003 (Jan.) and $1.86 in fiscal year 2004.