Guggenheim Retrograde Home Depot Due to Concerns Related to Margin Expansion



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An employee is wearing an orange Home Depot Inc. apron at a New York store.

Mark Kauzlarich | Bloomberg | Getty Images

The Home Depot's mbadive investment plan could prevent margin expansion, according to Guggenheim.

The company demoted the home improvement retailer's shares and withdrew its price target of $ 230.

"We are struggling to consider expanding the EBIT margin in 2020 because a) investment spending and b) D & A related brakes are about to increase," he said. Tuesday Steven Forbes, an badyst at Guggenheim, in a note to customers.

Home Depot launched its $ 5.4 billion investment plan in 2017, while the company is striving to invest in online stores, online stores and chains. supply. Although the plan is going well, some spending has been pushed back to 2020 and capital spending will accelerate next year and ultimately prevent expansion of margins, Forbes said.

Home Depot shares fell by over 1% in prolonged trading after Tuesday's downgrade.

Guggenheim estimates that investment spending in 2020 will have a negative impact on EBIT margins of 20 to 40 basis points. In addition, operating expenses will also be an adverse hurdle to the EBIT margin in 2020, Forbes said.

"Ultimately, although we do not necessarily expect HD to provide an EBIT margin of 2020E below the range indicated in the indicated range, we view the current consensus expectations as very aggressive given the impact potential, "said Forbes.

The company lowered its 2020 earnings per share estimates for Home Depot to the bottom of the consensus range.

Home Depot shares have risen nearly 35% since January.

-With reports from Michael Bloom of CNBC.

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