Home Depot Inc (HD) released its quarterly and 2015 fiscal year earnings on Tuesday, and they were impressive.
For the quarter, same-store sales in stores that have been open more than a year were up 8.9%. For the fiscal year, same-store sales were up 5.6%. And all revenue was up nearly 10%.
What’s more, HD raised its dividend 17%.
And while these numbers are impressive there’s also one other number that HD also noted: More than two-thirds of all the homes in America are more than 30 years old.
That bodes well for home improvement in quarters and years to come.
Plus, low interest rates mean the opportunity for people to borrow to take on larger projects or buyer nicer appliances or materials.
The strong dollar doesn’t bother HD because most of its business is generated in the U.S. It actually helps its margins when commodities like lumber and metals are cheap and the dollar is strong, especially with imports.
HD Stock Is Your Better Option
Lowe’s Companies, Inc. (LOW) released earnings the day after HD and got slammed because its numbers weren’t as strong as HD’s … but they weren’t bad at all, and the company raised expectations for 2016. However, it did take a major earnings hit for a $530 million impairment charge on the shuttering of a joint venture in Australia.
Still, HD is the best choice in this space, especially as the market looks to be in expansion mode again.
Just by sheer volume, HD is the more compelling play. It has 2,200 stores across the U.S. versus LOW’s 1,800. And it’s continuing to show investors that it cares about them by raising its dividend significantly.
HD did guide lower for 2016, but this may be more of a strategy to manage expectations than a reality. In this kind of market, optimism can be a double-edged sword. You can project a rosy future, see your stock rise and then get punished if analysts realize they were taken.
Bottom Line for Home Depot
HD has a strong brand in a market with significant barriers to entry. This is a big strategic advantage.
HD also provides installation services for big appliances, etc. That’s a great source of revenue when the average water heater or dishwasher lasts nine years and a refrigerator lasts around 16 years.
Many times when big appliances are replaced, homeowners will think about doing more than swapping one unit for another. This is the kind of thing that plays into HD’s hands, as it tries to be the one-stop renovation shop.
The stock has been volatile in 2016, but it is now likely to move forward on a strong uptrend.
Don’t miss out.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family 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.
