The Home Depot, Inc. (HD): Can This Home Improvement Retailer Improve Your Portfolio?

Page 1 of 2

The Home Depot, Inc. (NYSE:HD)is the biggest home improvement chain in the country, and has returned 20% gains to investors just to start 2013, including dividends. In addition, rising home sales and consumer confidence are playing into the thesis that Home Depot’s business is thriving.

After such strong performance, both in terms of the company’s underlying results as well as its stock price, should investors jump on the Home Depot bandwagon?

The Home Depot, Inc. (NYSE:HD)

U.S. housing showing signs of life

The housing market continues to improve, as evidenced by a variety of housing-related data points, which can only mean good things to come for The Home Depot, Inc. (NYSE:HD). According to the Standard & Poor’s Case-Schiller housing index, home prices rose 1.1% in March. This exceeded expectations and represented the biggest annual gain in nearly seven years.

Furthermore, existing home sales increased 4% in May, reaching the highest level since November 2009, according to the National Association of Realtors.

It stands to reason that as the housing market improves and consumers feel better about their homes and their personal finances, spending on housing should increase.

Industry-leading performance

These industry tailwinds are already being felt in Home Depot’s underlying results. Last year was a terrific one for the company. Earnings per diluted share in fiscal 2012 were $3, compared to $2.47 per diluted share in fiscal 2011, an increase of 21.5% year over year. These results reflect a nonrecurring charge of $0.10 per diluted share. On an adjusted basis, earnings per diluted share in fiscal 2012 were $3.10, representing an increase of 25.5% versus the prior year.

In addition, The Home Depot, Inc. (NYSE:HD)’s success has continued to start 2013. The retailer’s first-quarter same-store sales, which include only those locations open at least one year, increased 4.3% year over year. Meanwhile, diluted earnings per share soared 22% from the same period one year ago.

Unfortunately, not all home improvement chains are created equal. Close peer Lowe’s Companies, Inc. (NYSE:LOW) has not seen great results in recent quarters.

First, the company reported diluted earnings per share for the fourth quarter and full fiscal year of $.26 and $1.69, respectively. Full-year sales inched up less than 1% versus 2011. Then, Lowe’s provided a disappointing first-quarter report that revealed its sales fell 0.5% from the same period one year ago.

Furthermore, while the company’s first-quarter earnings per share rose 14% year over year, the results missed analyst expectations.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!