Housing Stocks Are in a Trot: Hovnanian Enterprises, Inc. (HOV), The Home Depot, Inc. (HD), Lowe’s Companies, Inc. (LOW)

The Home Depot, Inc. (NYSE:HD) is focused on growing both its brick-and-mortar and online presence including a push toward mobile applications. Its home services business, which allows sales professionals to visit customer’s homes to  help with the planning and execution of home improvements, is expanding. Home Depot’s made two acquisitions last year to support its home services business specifically for flooring installations as well as kitchen and bath remodelings. According to Kevin Hofmann, the president of Home Depot’s online business, the home services segment is 4% of the company, which suggests it could be a catalyst for future growth.

Shares of Lowe’s Companies, Inc. (NYSE:LOW) are hovering near their 52-week highs as well. The company recently reported a slight 0.5% decline in its fourth quarter sales to $11 billion and a 0.06% rise in fiscal year 2012 sales to $50.5 billion. Fourth-quarter net earnings declined by 10.6% while diluted EPS were flat compared with the year ago quarter. The retailer attributes the disappointing quarterly performance to the extra calendar week in 2011 that created a tough comparison for 2012. For the fiscal year, net earnings increased 6.5% to $2 billion or $1.69 per diluted share.

Lowe’s Companies, Inc. (NYSE:LOW) also revealed a $5 billion share buyback program, which replaces an existing repurchase program that was already in place and is expected to occur over the next two years. Perhaps the share buyback will boost forthcoming earnings per share. Lowe’s is predicting fiscal 2013 diluted earnings per share of $2.05 and 4% sales growth in the period.

The Home Depot, Inc. (NYSE:HD) has a trailing price-to-earnings ratio of 23, compared to a trailing P/E of approximately 22 for competitor Lowe’s Companies, Inc. (NYSE:LOW). In recent days, after reporting a 32% increase in its fourth quarter earnings combined with a 14% rise in sales, Home Depot lifted its quarterly dividend by 34% to $0.39 per share, which places the dividend yield at 2.3% compared with a quarterly dividend of $0.16 and a yield of 1.7% at Lowe’s Companies, Inc. (NYSE:LOW). Between the two stocks, The Home Depot, Inc. (NYSE:HD) has more growth momentum working in its favor.

All in all, the housing sector offers investors a compelling opportunity. The population is rising, home foreclosures and delinquencies are slowing, and homeowners are investing in their properties. At this pace, stocks in this sector have growth potential in 2013.

The article Housing Stocks Are in a Trot originally appeared on Fool.com.

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