Home Depot Raises Forecast on Solid Earnings Beat

Housing

Published: November 13, 2012 7:28 am

Last Updated: November 13, 2012 7:51 am

The Home Depot Inc. (NYSE: HD) reported third-quarter adjusted diluted earnings per share (EPS) of $0.74 and $18.1 billion in revenues before markets opened this morning. In the same period a year ago, the home improvement store reported EPS of $60 on revenue of $20.23 billion. Third quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.70 and $17.93 billion in revenue.

On a GAAP basis, Home Depot posted EPS of $0.63, which was lowered by costs associated with closing seven stores in China.

The company also raised its full-year adjusted EPS estimate to $3.03, above the current consensus estimate of $2.97, and also above the company’s estimate of $2.95 at the end of the second quarter. On a GAAP basis, Home Depot expects EPS of $2.92. The company also will have repurchased $4 billion worth of its own stock by year’s end.

Competitor Lowe’s Companies Inc. (NYSE: LOW) reports earnings next week and is expected to post EPS of $0.35 on revenues of $11.9 billion. Lowe’s missed estimates last quarter and lowered its guidance. Same-store sales fell as well. There’s little evidence that Lowe’s will get a ride on Home Depot’s coattails in the third quarter.

Home Depot’s chairman/CEO said:

Our third-quarter results were better than we expected and reflected, in part, what we believe is the start of the path toward the healing of the housing market.

U.S. same-store sales for the quarter rose 4.3% year-over-year, and the rise for all stores was 4.2%.

Clearly the company thinks that the uptick in sales and profits is the result of the recovering housing market in the United States. Home Depot’s confidence is the result of existing homeowners who are watching housing values rise and are either preparing their homes for sale next year or fixing them up with the idea of staying there. And then there’s the rebuilding following Hurricane Sandy, which the company does not mention, but which must have played into its latest guidance.

Shares are up about 0.6% in premarket trading, at $61.50. The current 52-week range is $36.41 to $63.20. Thomson Reuters had a consensus analyst price target of $62.20 before today’s results were announced.

Paul Ausick

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