Housing Hiccup Can't Slow Home Depot
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
Headlines this morning make it sound like the housing market is in the midst of a significant slowdown, but you wouldn't know it by the 3.4% bump in Home Depot shares this afternoon. The home improvement retailer is the only big mover to the plus side on the Dow Jones Industrial Average today, keeping the index from falling any further than its 0.26% drop as of 3:30 p.m. EST.
The S&P/Case-Shiller 20-city composite index's seasonally adjusted 0.8% home-price rise in December showed a dip from 0.9% growth a month earlier. But this doesn't mean the housing market is in trouble.
Just because growth is slowing doesn't mean home prices aren't still increasing. In fact, by taking a longer-term view we see that home prices were up 13.4% in December from a year ago, the largest spike in eight years.
Home Depot steadily grows with housing
The beneficiary of growth in housing today is Home Depot, which reported a 4.4% increase in same-store sales in the fourth quarter and 4.9% growth in the U.S. Overall, revenue was down 3% from a year ago to $17.7 billion, but the 2013 quarter encompassed one less week than the last quarter of 2012. Without that calendar change sales would have been up 3.9%.
Earnings per share were up 7.4% to $0.73, and would have been up another $0.07 if the extra week had been included.
As homeowners become more comfortable putting their homes on the market, and new buyers come into the market and look to update houses, Home Depot will be there to fill their needs. Housing doesn't need to grow by double-digits every year for Home Depot to succeed, so slowing growth isn't all bad for the retailer.
What investors in Home Depot should really hope for is a healthy housing market, void of the boom and bust that we've seen over the last decade. That would keep earnings rising at a slow and steady pace, which is more than most retailers can say at this point.
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The article Housing Hiccup Can't Slow Home Depot originally appeared on Fool.com.Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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