HD Stock – Buy Home Depot to Play the Housing Recovery

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There’s no sugarcoating it: The past few weeks have been rough for the U.S. economy. Last week, we found out that retail sales fell flat in April, and the prior week’s March trade report was horrific.

Home Depot Stock Home Depot EarningsBetween the cautious American consumer and the huge trade deficit, I expect the first-quarter Gross Domestic Product (GDP) to be revised lower next week. However, amidst all of this bad news, one notable bright spot to the economy shines, and that’s the housing market.

The Commerce Department revealed yesterday morning that home construction surged in April, with U.S. housing starts increasing 20.2% to an annual rate of 1.14 million homes, the fastest pace since November 2007.

Single-family home construction rose 16.7% in April, while apartment building surged 31.9%. Building permits increased 10.1% over March to an annual rate of 1.14 million last month. The jump in housing starts and building permits in April could very well be the prelude to an increase in new homes sales in the upcoming months.

This is great news, and investors would do well to take note of any buying opportunities tied to the housing recovery. To get you started, I have one home improvement retailer that I’m recommending:

Home Depot Inc (NYSE:HD) is the world’s largest home-improvement retailer. From air conditioning units to gardening supplies to home appliances to electrical fixtures, Home Depot is a one-stop-shop for all home improvement needs.

Just yesterday morning, HD revealed that it had a strong start to 2015. According to management, the continued recovery of the U.S. housing market drove higher sales at Home Depot.

Compared with Q1 2014, net income improved 14.3% to $1.6 billion, or $1.21 per share. Excluding special items, including settlement benefits, adjusted earnings per share was $1.16. HD stock beat the consensus estimate by a penny, or by 1%. Over the same period, net sales climbed 6.1% to $20.89 billion, which also topped the $20.82 billion consensus estimate by a hair.

Pleased with these results, Home Depot also lifted its outlook for fiscal year 2015. HD now forecasts between 11% and 12% annual earnings growth, or between $5.24 and $5.27 EPS. This is above the Street view of $5.23 EPS for fiscal year 2015.

Meanwhile, Home Depot also expects to post between 4.2% and 4.8% annual sales growth, which is in line with the 4.4% consensus estimate. HD is an A-rated “strong buy.”

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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