The Home Depot, Inc. (HD) Beats Expectations; Now What?

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The Home Depot, Inc. (NYSE:HD)The Home Depot, Inc. (NYSE:HD) reported higher quarterly sales and earnings figures this week. The strong results were due in part to the housing market recovery that is slowly gaining momentum. This article will provide an overview of the company’s quarterly results and the 2013 outlook for The Home Depot, Inc. (NYSE:HD) and some of its competitors.

Home Depot’s first quarter earnings

The Home Depot, Inc. (NYSE:HD) is the nation’s largest home improvement retail chain. The company announced quarterly results this week that beat the expectations of many Wall Street analysts. For the retail outlet’s quarter that ended May 5 Home Depot earned $1.23 billion – $0.83 per share. This is an increase from $1.04 billion ($0.68 per share) for the same period in 2012.

This beat a consensus of analysts’ expectations of $0.76 per share. Moreover, net income was up 18% and this is due in part to the housing recovery that was seen in the Case/Schiller index earlier this year. CEO Frank Blake reportedly said “While weather negatively impacted our seasonal and exterior businesses, our core interior project business remained strong throughout the quarter.”

“This was encouraging and consistent with the views that the housing market is starting on the path to recovery,” said Blake.

The key words in that quote are core interior project business. The Home Depot, Inc. (NYSE:HD)’s strong quarter is not only a reflection of an uptick in the housing market, but also strong demand in the Northeast as homeowners are rebuilding in the wake of Super Storm Sandy.

In sum, The Home Depot, Inc. (NYSE:HD)’s first-quarter net income rose 18%. Revenue for the company was also up by 7% to $19.12 billion from $17.81 billion – analysts expected $18.62 billion. This is critical since improved revenues are necessary for future growth. Home Depot’s solid revenue numbers are the result of gains in the outlet’s online business which accounted for 4.3%.

And the outfit’s outlook for fiscal 2013 now is earnings of $3.52 a share, with revenue up about 2.8 percent. Previous guidance was for earnings of $3.37 a share, with revenue rising about 2 percent. This new outlook hints at revenue of $76.83 billion, based on 2012’s $74.75 billion. Since the good news was announced, shares rose by about 2.5%.

Lowe’s misses the mark

Lowe’s Companies, Inc. (NYSE:LOW) reported a weaker-than-expected quarterly profit that was apparently affected by a cold and rainy spring as well as strong competition from its rival Home Depot.

Lowe’s Companies, Inc. (NYSE:LOW) sales fell 0.5% to $13.09 billion in the first quarter ended on May 3, missing the analysts’ average estimate of $13.45 billion. It was the 16th straight quarter that Lowe’s posted weaker same-store sales than The Home Depot, Inc. (NYSE:HD). But Lowe’s (NYSE:LOW) apparently stocked more lawn and garden products than Home Depot while that outfit was selling boatloads of sheet rock, lumber and other building material in the afflicted Northeast corridor.

Meanwhile Lowe’s Companies, Inc. (NYSE:LOW) has been working to improve product selection and customer service by offering daily low prices and products targeted to specific geographic markets. The retail home improvement chain has also reportedly increased its assortment of products available online. However, Lowe’s was slow in cutting costs in the wake of the housing meltdown compared to Home Depot.

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