Should You Buy the Dip at Home Depot?

The Home Depot Inc. (NYSE:HDI) stock was up 0.19% in early afternoon trading on October 19. Shares had plunged 14.5% over the past month.

The stock has been battered in the middle of a global stock market rout that has extended into the second half of October. Analysts have blamed anxiety over interest rates and rising trade tensions for the selloff.

Home Depot released its second-quarter results back on August 14. The company reported sales of $30.5 billion which represented a year-over-year increase of 8.4%. Comparable sales also posted 8% growth in the quarter.

Home Depot reported net earnings of $3.5 billion or $3.05 per diluted share compared to net earnings of $2.7 billion or $2.25 per diluted share in the previous year.

Like other top U.S. corporations, Home Depot has received a big boost from tax reform. For the full-year fiscal 2018 Home Depot is projecting sales to rise 7% with comparable sales growth of approximately 5.3%.

The company also raised its guidance for diluted earnings-per-share growth to $9.42. Home Depot also offers a cash dividend of $1.03 per share representing a 2.2% dividend yield.

The decline of Sears should also provide a boost to Home Depot, according to retail analyst Greg Melich of MoffetNathanson. He estimates that Home Depot will gain $500 million in sales from its losses in 2018.

Home Depot is nearing its 2018 lows and should be a target that investors consider in October. The company is well-positioned for a strong finish this year and should continue to benefit from what is still a strong U.S. economy.