Shares of Home Depot (HD) are off 24 cents, or 0.7%, at $34.49, following yesterday’s better-than-expected Q1 report and the raised forecast for this year.
Today, UBS analyst William Truelove wrote in a note to clients that the company should be able to borrow another $1 billion to $2 billion this year to repurchase shares and pay dividends. In fact, if the firm didn’t borrow that much, it would be something of a letdown, given that the form has a target for debt-to-Ebitda to be about 2.5 times.
With about $10 billion in net debt on the books and Ebitda projected this year to come in around $5 billion, by Truelove’s estimates, the company is below its own target for leverage, in other words.
With the additional debt, Home Depot can boost per share earnings by five cents this year, 20 cents in 2011, and 39 cents in 2012, estimates Truelove.
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