Google News is showing reports that home prices capped off 2012 with the biggest rise in six years. The economy finally seems to be slowly turning around and headed in a positive direction. Some earnings from home improvement stores were disappointing in the fourth quarter, yet one company showed very positive results.
Lowe’s Companies, Inc. (NYSE:LOW) seemed to benefit from the aftermath of Hurricane Sandy, and appears to be able to maintain pricing as gross margins remained relatively flat. Despite better than expected earnings, it seems as though disappointing guidance for 2013 either matched or trumped fourth quarter earnings. The company’s P/E is 21.3, or 1.5 below the industry average. Although Lowe’s revenues decreased slightly in the fourth quarter, net income rose approximately 31%. The company does seem fairly priced, with a 5.9% Free Cash Flow (FCF) yield.
The Home Depot, Inc. (NYSE:HD) posted excellent results this past quarter, including a 34% increase in its quarterly dividend. Investors seeking dividend consistency should look no further. This marks the 104th consecutive quarterly dividend by the company, and it just authorized a $17 billion buyback through 2015. The Home Depot, Inc. (NYSE:HD) saw same-store-sales increase by approximately 7%, and net earnings were 29% higher than the year-ago quarter. Although Lowe’s FCF yield is nearly 1% higher, Home Depot’s earnings yield is 3% higher than Lowe’s. Surprisingly, Home Depot’s P/E is 22.7, 1.4 higher than Lowe’s.
Despite The Home Depot, Inc. (NYSE:HD) having emphasized its paint departments in recent years, competitor Sherwin-Williams Company (NYSE:SHW) still holds an estimated market share of 30% and is the clear leader in the domestic paint market. Sherwin Williams is the smallest of these three companies, showing a market cap of just over $16 billion and 3,400 company-owned stores. The Home Depot, Inc. (NYSE:HD) and Lowe’s have approximately $101 billion and $41.6 billion market caps, respectively. With an earnings yield of just 3.6%, the company also shows a low FCF yield of 4.4%.
Unfortunately for Sherwin Williams shareholders, the P/E of 9.2 is higher than the industry average, and the company has a dividend yield of just 1.1% compared to an industry average of 1.7%. Lowe’s dividend yield actually meets the industry average, while Home Depot is beating it by .1%.
Despite all the figures above, you can see how the company’s stocks have performed in the past year.
The Foolish Bottom Line…
Sherwin Williams doesn’t show the most promising metrics, but has performed better than both Home Depot and Lowe’s. Lowe’s guidance should not make investors more comfortable, but the company does have more institutional ownership than both of its competitors. There is no doubt that Home Depot’s shareholders are pleased with the Q4 results, and it doesn’t appear that these results will be changing in the near future.
The article Home Depot Paints A Pretty Picture originally appeared on Fool.com and is written by Tyler Wofford.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
