Reviving Housing Market Revs-Up Home Depot Earnings
By Dhanya Skariachan
A recovery in the U.S. housing market helped Home Depot beat analyst quarterly profit and sales estimates on Tuesday, prompting the world's largest home improvement chain to raise its outlook for the fiscal year.
Shares of Home Depot (HD) were up 3.3 percent at $77.70 in trading before the market opened.
The results, which came just weeks after data showed that U.S. home prices rose in May, gave more evidence that the housing market was healing after years of weakness.
A bubble in the U.S. housing market was at the core of the 2007-2009 financial crisis. During the downturn, Home Depot's sales at established stores fell more than 20 percent in such markets as Florida and California.
In recent quarters, housing has rebounded in those markets and other states where Home Depot has a heavy presence, such as Arizona and Nevada. In May, Home Depot said its sales to contractors and professional customers increased faster than those to individual homeowners and other shoppers for the first time since 2008.
Net earnings rose to $1.80 billion, or $1.24 a share in the second quarter ended Aug. 4 from $1.53 billion, or $1.01 a share, a year earlier. Analysts on average were expecting a profit of $1.21 a share, according to Thomson Reuters I/B/E/S.
Sales rose 9.5 percent to $22.5 billion, topping the analyst average estimate of $21.8 billion.
For the year, the company raised its earnings forecast to $3.60 a share from $3.52. It said it expected a sales rise of about 4.5 percent, up from previous expectations of a 2.8 percent increase.
Home Depot has also benefited from its own efforts to improve customer service and attract shoppers with more compelling prices than its rivals. It has tailored its marketing to local areas, centralized distribution centers and shifted more workers to jobs where they serve customers directly.
As a result, Home Depot has gained market share from rival Lowe's Cos. (LOW), which is due to report results on Wednesday.
Home Depot's sales at stores open at least a year rose 10.7 percent in the second quarter, including an 11.4 percent increase in the United States.
At Monday's close, Home Depot shares were up 22 percent since the beginning of the year, outperforming the Standard & Poor's 500 index (^GSPC) and Dow Jones industrial average (^DJI).