Home Depot crushes it again; ups outlook for the year

Friday, November 11, 2016, Vol. 40, No. 46

ATLANTA (AP) — Home Depot, with unemployment falling, mortgage rates near historic lows and wages and home prices rising, upped its outlook for the year as sales surged in the third quarter and customers spent more with each visit.

Shares, having already touched an all-time high this year, climbed nearly 2 percent in premarket trading Tuesday, after Home Depot extended a streak of surprisingly strong earnings.

Home Depot and rival Lowe's have stood out from other retailers for several years now, thanks in part to ultralow mortgage rates that have led to a warming housing market and an increase in refinancing.

"We experienced balanced sales growth in the quarter driven by an increase in both ticket and transactions, and our continued focus on productivity drove double-digit earnings-per-share growth," said CEO Craig Menear.

The number of customer transactions rose 2.4 percent, and the average receipt, how much customers spent in each visit, jumped 3 percent.

For the three months ended Oct. 30, Home Depot Inc. earned $1.97 billion, or $1.60 per share, which was 2 cents better than Wall Street had expected, according to a poll of industry analysts by Zacks Investment Research.

And it was much better than the $1.73 billion, or $1.35 per share, put up by the Atlanta company last year.

Revenue increased to $23.15 billion from $21.82 billion, also edging out analyst projections.

Sales at stores open at least a year, a key gauge of a retailer's health, climbed 5.5 percent. They rose 5.9 percent in the U.S.

While home sales this year have leveled off at a nearly healthy level of 5.5 million, there are some signs of possible headwinds.

Mortgage News Daily this week reported that 30-year fixed rate mortgages hit 4 percent. That's up from the 3.57 percent rate that was reported on Thursday by mortgage giant Freddie Mac. The sharp spike is only matched by the worst three straight days of the mid-2013 taper tantrum, Mortgage News Daily said.

Yet Depot upped its annual per-share earnings expectations by 15.9 percent from last year. Its prior outlook was for $6.31 per share, which it had boosted from a previous per-share projection of $6.27.

Analysts polled by FactSet expect full-year earnings of $6.33 per share.

Home Depot ran a total of 2,276 retail stores in all 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico at the third quarter's end.

Lowe's Cos. will reports its quarterly earnings results on Wednesday.