The Home Depot, Inc. (HD)’s Inside Story

The Home Depot, Inc. (NYSE:HD) is now basking in its own glory. It has proved that not only is it well prepared to play the housing recovery, but its efficient and effective strategies give it an extra edge over its competitors. The company has beaten all analyst expectations hands down in the recently concluded first quarter of 2013.

Revenue grew by a solid 7.4% year-over-year to $19.1 billion while net income rose by 18% to $1.23 billion or $0.83 per share. US stores reported a positive same store sales growth of 4.8%. Analysts at Thomson Reuters were expecting earnings of $0.77 per share on revenue of $18.68 billion.

There are many factors which have contributed to the robust results, like the recovery in the housing industry, proper planning, and good strategies. Let us take a closer look.

Housing industry is recovering

There is no denying the fact that people in the US are buying houses. In a recent report by the National Association of Realtors, it is indicated that in April the sales of previously owned U.S. homes was up by 0.6% to an annual rate of 4.97 million. These are the best figures since November 2009.

The property prices are also on the rise. Federal Housing Finance Agency has indicated that in the first quarter of 2013, US house prices have gone up by 1.9% from the fourth quarter of 2012 and by 6.72% from the first quarter of 2012. This is creating strong consumer sentiments for starting new housing projects and pouring money into them.

All this creates a perfect backdrop for The Home Depot, Inc. (NYSE:HD) to have a solid year ahead. On the basis of its excellent first quarter performance and expectation of higher sales and earnings in the second quarter, the company has revised upwards its revenue and earnings guidance.

It is expecting 2.8% higher revenue and 17% increase in diluted earnings per share to $3.52. Analysts expect earnings of $3.60 per share and around 3.4% revenue growth.

Significant exposure to professional segment

A true housing recovery play is only possible through a good exposure to professional customers like professional re-modelers, general contractors, repairmen, etc. The Home Depot, Inc. (NYSE:HD) understands the significance of this customer group and has developed several attractions for its professional customers.