Home Depot gains from U.S. housing strength, profit and sales beat

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[November 15, 2016] (Reuters) - Home Depot Inc,  the No. 1 U.S. home improvement chain, reported third-quarter profit and sales that beat analysts' estimates as people spent more on their homes, encouraged by the improving housing market in the United States.

A Home Depot store is seen in Long Beach, California, U.S., September 8, 2016. REUTERS/Lucy Nicholson

 

The company, which also raised its full-year earnings forecast, is benefiting from higher wages and as rising home values as well as tightening for-sale inventories in many markets spur remodeling activity by homeowners.

Home Depot's shares were up 1.5 percent at $129.62 in premarket trading on Tuesday.

Construction of U.S. single-family housing surged in September, while building permits also increased, according to U.S. Commerce Department data, suggesting that overall residential construction may rise again in the current quarter.

The Federal Reserve has also struck an upbeat note on the housing market, saying in mid-October that residential real estate activity expanded in most districts in recent weeks.

That has helped Home Depot and smaller rival Lowe's Cos Inc <LOW.N> buck the weak sales trend at department store operators and other retailers in the past few quarters. Lowe's is scheduled to report its third-quarter results on Wednesday.

Home Depot said sales at its established stores rose 5.5 percent in the three months ended Oct. 30. That was more than the 4.4 percent increase analysts on average were expecting, according to research firm Consensus Metrix.

The company said the number of customer transactions rose 2.4 percent in the quarter, while customers spent 3 percent more on average per transaction.

That helped its net sales increase 6.1 percent to $23.15 billion. Net earnings rose 14.1 percent to $1.97 billion, or $1.60 per share.

Analysts on average had expected a profit of $1.58 per share on sales of $23.04 billion, according to Thomson Reuters I/B/E/S.

Home Depot now expects adjusted earnings of $6.33 per share in the year ending January 2017, higher than its previous forecast of $6.31, but in line with analysts' estimates.

The company said it still expects net sales to rise about 6.3 percent for the full-year and comparable sales to increase about 4.9 percent.

Analysts on average expect Home Depot's net sales to increase 6.4 percent.

Home Depot's shares had fallen 3.5 percent this year through Monday, less than the near 8-percent fall in Lowe's, but underperforming the 1.9 percent increase in the S&P consumer discretionary index <.SPLRCD>.

(Reporting by Sruthi Ramakrishnan and Abhijith Ganapavaram in Bengaluru; Editing by Savio D'Souza)

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