This morning, Home Depot reported the result of its modified Dutch auction and updated its earnings forecast for the year. The home-improvement retailer accepted for purchase about 289.3 million shares of its common stock at a price of $37 per share, for a total cost of $10.7 billion, excluding fees and expenses related to the offer. These shares represent 14.6% of the shares outstanding on August 31.
Before the tender offer, the company's fiscal year profit forecast from continuing operations was a decline of 12% to 15% from the year-ago period. Having completed the tender offer, the company's updated target is for a decline of 7% to 9%. For the purpose of computing diluted earnings per share, Home Depot expects outstanding shares will be reduced by about 165 million and 290 million shares in the third and fourth quarters of the fiscal year, respectively.
The shares of Home Depot are up 0.5% this morning, bouncing back with the rest of the market from Friday's sharp loss. The equity is currently clinging to support in the 33 area, which buoyed the shares in July through September 2006. From a longer-term perspective, the stock has been grinding sideways since October 2003 between support at the 33 level and resistance at the 43 level.
Options players have extremely high hopes that the shares will finally bounce back. Schaeffer's put/call open interest ratio rests at 0.43, as call open interest more than doubles put open interest among near-term options. This ratio is also rests at an annual low.