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The main focus on the stocks market seems to be on the trade war and the impact of China issues on the prospects on U.S. companies. This is where stock like Home Depot (HD) comes in. Home Depot business is primarily located in the U.S. with slight exposure to Mexico and Canada.

Home Depot recently reported its first-quarter earnings and while the results didn't spark short-term buying interest in the stock, the company is well-positioned for long-term growth and can offer investors safety from the trade war.

North American Focused 

The company added two net new stores during Q1, bringing its total store count up to 2,289. About 1,980 of these stores are located in the United States, while Canada has about 180 locations and Mexico has 120. The company boasted 238 million square feet of retail selling space. Total sales per square foot came in at $435 during the first quarter, up 5.6% y/y.

These North American stores source products globally, though in the recent Q1 conference call, Home Depot's Executive Vice President of Merchandising Ted Decker noted that while the impact of tariffs would vary across different categories, overall, he believes they will be "manageable".

Thus far, tariffs have cost Home Depot roughly $1 billion. If the newly imposed tariff increases hold, that will result in an incremental $1 billion impact moving forward. Obviously, the company and its shareholders would rather not see costs increase by approximately $2 billion because of tariffs, but it's worth noting that this amounts to less than 2% of the company's annual sales.

A Blue Chip Company Trading For a Fair Price 

Since reporting Q1 earnings, its stock has still experienced a bit of weakness lately. Shares are trading for $191/share, which is down some 8% since the recent highs that it hit in April. This weakness has brought the stock's trailing-twelve-month price to earnings ratio down to roughly 19x, which is below its long-term average of 21.3x.

During the Q1 report, Home Depot management issued full-year earnings per share guidance of $10.03. Using this forward-looking estimate, Home Depot is slightly cheaper, trading for just 18.8x guidance.

While this valuation isn't necessarily cheap, It is a fair price to pay for Home Depot shares. When you look at the likelihood that earnings will continue to rise, eventually Home Depot's multiple will revert upwards, back towards the historical norm and the company will continue to reward investors with strong dividend yield, the prospects of attractive long-term returns with Home Depot are bright.

Ultimately, this is a company that requires a strong consumer to succeed. Home Depot has been able to stand up against the likes of Amazon (AMZN) in the retail space because it offers a myriad of big-ticket items and has sales people available to guide consumers through the labour intensive projects that they're about to embark upon when they walk through Home Depot's doors.

Online traffic at Home Depot's website grew 23% during the first quarter, so it appears that its e-commerce business is healthy and will continue to compete. And even though there are a ton of negative headlines swirling around the markets right now regarding trade talks, the fact of the matter is, the U.S. economy remains strong, unemployment is at record lows, wages continue to increase and consumer confidence is high.

Barring some sort of black swan event, none of this should change in the short-term and that bodes well for Home Depot moving into the second half of 2019.

source: The Street