Home Depot Inc (NYSE:HD) reported first-quarter earnings Tuesday morning, and the company did not disappoint. With HD stock already up nearly 50% in the past year, shares opened 1.5% higher after the earnings beat.
Sure, HD stock was down as of this writing, but that’s nothing to worry about — almost certainly some profit-taking after a huge run in the past six months.
The solid quarter is also a bullish sign for rival Lowe’s Companies, Inc. (NYSE:LOW), which reports its own first-quarter results tomorrow morning before the bell.
A Strong Spring Quarter
Home Depot stock managed to beat both earnings per share and revenue estimates last quarter, while simultaneously raising full-year EPS guidance. You’d be hard-pressed to see HD stock slip on a day like today.
EPS clocked in at $1.16, beating analyst estimates by a penny, while revenue of $20.9 billion just exceeded consensus expectations of $20.82 billion. Management now expects full-year earnings to grow by between 11% and 12% per share of HD stock. The $5.24 to $5.27 EPS range was a meaningful increase from previous forecasts of up to $5.17 per share.
The world’s largest home improvement retailer benefited from an eager spring season; while the majority of businesses in the U.S. experience their strongest season in the October-December quarter, HD stock investors are more interested in the results of the spring quarter, which is typically the company’s strongest.
Sure, homeowners eagerly took to home improvement projects with the earlier arrival of spring, but one macroeconomic metric was even more important than the mercury readings for HD stock: residential real estate prices.
Management watches home prices carefully, and, sure enough, a 7.4% rise in the price of single-family homes wasn’t too far off from the 7.1% same-store sales growth HD saw in its U.S. locations.
Let’s just call it like it is: The housing market is booming again, and a real estate rebound is markedly bullish for the likes of HD and LOW.
Home prices consistently rising once again, and homebuilding is getting a hot start to the year, as well. Housing starts in April soared, rising 20.2% year over year to an annualized pace of 1.14 million homes — the highest rate since November 2007.
Those numbers helped HD and LOW, and they also helped lift homebuilders, which got off to a hot start in the stock market today. D.R. Horton, Inc. (NYSE:DHI), Lennar Corporation (NYSE:LEN), and PulteGroup, Inc. (NYSE:PHM) were each gaining solid ground, up more than 2% in early trading.
All in all, this was a really robust quarter for HD stock, and with a forward price-to-earnings ratio beneath 20, a 2% dividend, and sustained growth to be had on the horizon, shares are likely to edge skyward.
As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
