Home improvement companies have long been under pressure due to the weak housing market, as consumers cut back on large-scale renovation projects. But they stand ready to benefit as evidence mounts that the housing market is slowly improving.
Last week a measure of U.S. home prices reported by real estate data provider CoreLogic climbed the most in six years. And low interest ratings are making it attractive for those that can afford purchases.
New home sales jumped last month to the highest annual pace in the past two and a half years. And while sales of previously occupied homes dipped in September, they have risen steadily in the past year.
Home Depot’s CEO said the slowly recovering housing market is reflected in results, although credit availability remains an issue.
"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," Chairman and CEO Frank Blake said in a statement on Tuesday.
In a call with analysts, Blake added he sees the housing market becoming "an assist to our growth rather than an anchor."
His statement signaled a "stronger tone" on the housing market than in prior quarters, said NBG Productions analyst Brian S. Sozzi, who called the remarks encouraging.
Home Depot Inc.’s smaller rival Lowe’s Cos. reports results on Monday.
For the period ended Oct. 28, Home Depot Inc. reported net income of $947 million, or 63 cents per share. That’s up from $934 billion, or 60 cents per share, a year earlier.
Excluding a charge for closing some stores in China, earnings were 74 cents per share.
That topped the 70 cents per share that analysts surveyed by FactSet predicted.
Revenue rose more than 4 percent to $18.13 billion. Wall Street expected $17.92 billion.
Home Depot’s stock added $1.21, or 2 percent, to $62.37 in premarket trading.
The Atlanta company posted strong sales in the U.S., with revenue at U.S. locations open at least a year climbing 4.3 percent. For the total company, the figure increased 4.2 percent.
This metric is a key gauge of a retailer’s health because it excludes results from stores recently opened or closed.
For the year, Home Depot now expects net income of $2.92 per share, or $3.03 excluding the costs of closing stores in China.
It expects anticipates revenue will climb about 5.2 percent. Based on 2011’s revenue of $70.4 billion, this implies $74.06 billion. Home Depot’s prior forecast was for a 4.6 percent increase, which implied revenue of $73.63 billion.
Analysts expect earnings of $2.99 per share on revenue of $73.68 billion.