Home Depot's announced restructuring should be read for what it reveals, and not only what is said. A company reorganizes, more often than not, because the current structure is not providing the anticipated return on capital it once had. Whether it has become unwieldy for one reason or another is of little concern. What matters is the impact it may have upon future returns on equity.
How many times before have I seen similar disclosures close to a quarterly report, I cannot recall. More often than not, the subsequent quarterly report was a disappointment to the "Street." It makes perfect sense, however, for management to assuage investors with news of change before the event. It demonstrates, in their opinion, that they are ahead of changing events in the industry. A reasonable thing for them to do.
The technical look to the stock, however, offers some support to the conclusion above. The bid/ask supply is not supportive of the current stock price. Watch for a large block, or two, to move before the qrtrly. report. Moves on a down-tick, or on the Instinet, may confirm my assumption.
If I were to hazard a probability of negative outcome, it would be at 70%.
Terrence |
