Home Depot (NYSE:HD) makes the list at Evercore ISI of Best Core Ideas for outperformance over the next year.
The macro setup looks strong for the home improvement retailer given the steady project momentum, increasing pro trends, rising home prices and the ageing housing stock. Evercore thinks when market sees how much of the uplift is sustainable into 2022 and 2023, the +$16B of growing free cash flow from Home Depot (HD) will shine through.
Analyst Greg Melich: "Home Depot has reinvented itself over the past decade into a benchmark multichannel consumer company. We have a favorable view of their core U.S. Home Improvement market due to healthy industry growth of (normalized) +4 -5%, H.I. spending levels per occupied housing unit still below previous peak levels. The expansion of eCommerce to 14% of their sales (almost 2x sector’s 8%) is just icing on the cake that the market doesn’t appear to discount."
Home Depot (HD) is said to be on track for sales productivity 30% higher in 2022 than 2019. If Nesting trends and share gains hold, HD's margins are expected to be flat in 2022.