Home Depot profits top estimates as consumers tinker away
If Home Depot Inc.’s results are any indication, Americans are showing no sign of putting down their tool belts. Profit increased to $1.44 (U.S.) a share last quarter, the Atlanta-based company said Tuesday. That topped analysts’ estimates, and came along with strong sales and a plan to return more cash to shareholders.
The largest home-improvement retailer is benefiting from a years-long rebound in housing prices that has made homeowners more willing to spend on their properties because they see them as a sound investment. That’s helped Home Depot avoid the malaise that has spread across much of retail, where lacklustre demand has weighed on results.
“The market had growing fears around trends in the home-improvement category due to rising interest rates and a commensurate drop in mortgage refinancing — which is often used for larger projects,” David Schick, director of research and lead retail analyst for Consumer Edge Research, said in an email.
“Home Depot fourth-quarter results and guidance reconfirmed consistent demand and the structural strength of their business model.”
The shares rose as much as 1.9 per cent to $145.65 (U.S.) in New York. Home Depot already had gained 6.7 per cent this year through Friday.
Revenue climbed 5.8 per cent to $22.2 billion (U.S.) in the fourth quarter, which ended Jan. 31, surpassing analysts’ $21.8-billion projection. Sales at stores open for more than a year — a key benchmark for investors — rose 5.8 per cent. That beat analysts’ 3.5-per-cent prediction, according to Consensus Metrix.
Home Depot said it plans to funnel more cash back to shareholders. The board boosted the company’s quarterly dividend 29 per cent to 89 cents a share. The company increased its targeted dividend-payout ratio to 55 per cent of net earnings, up from 50 per cent. The board also authorized a $15 billion (U.S.) share-buyback program, replacing its previous plan.
The company forecast that sales this year would rise 4.6 per cent, which would work out to revenue of about $99 billion (U.S.) and that profit would hit $7.13 a share. Analysts projected revenue to be $98.5 billion and profit to be $7.16 a share.
Home-price gains accelerated in the fourth quarter, with increases reported in 89 per cent of U.S. metropolitan areas, as competition heated up for a record-low supply of listings, the National Association of Realtors said earlier this month.
Job growth is fuelling demand in a market starving for listings. The number of previously owned homes available for sale at the end of December dropped 6.3 per cent from a year earlier to1.65 million, the fewest since the realtors group started tracking the data in 1999.