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Retailer earnings surge on recovering housing market

Home Depot and Lowe's both expecting growth

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Home Depot (HD) might not have appeared too pretty on the stock market Tuesday, but nobody was pointing fingers at its second-quarter earnings report.

The home improvement retailer posted a profit of $1.8 billion in the second quarter coupled with 9.5% growth in sales to $22.5 billion. Per share, earning rose 22.8% from last year to $1.24 a share, three cents up from the Wall Street prediction of $1.21 a share.

These strong numbers seem to indicate that more and more households are able to make repairs — repairs they put off during the economic crisis. And when evaluating the retailer's play on the HW-30 Index Tuesday, it's evident that the retailer, like other housing-related stocks, is still subjected to wild swings despite benefiting from an ongoing housing recovery.

"The second quarter results exceeded our expectations as our business benefited from a rebound in our seasonal categories, continued strength in the core of the store and the recovering housing market in the U.S.," said Frank Blake, chairman & CEO.

When compared to the second quarter in 2011, during the peak of the recession, Home Depot was only posting net earnings of $1.4 billion. That was up from $1.2 billion in the same period of fiscal 2010.

As the job market continues to gain steam, the desire to renovate and rehabilitate homes becomes more realistic. As homeowners obtain more equity in their home, the value of a renovated home becomes even stronger.

Comparable store sales for the second quarter of fiscal 2013 rose 10.7%, and comp sales for U.S. stores grew 11.4%. Total sales increased 9.5% from the second quarter of fiscal 2012. All of this growth suggests indicators that homes are being repaired and rebuilt.

Before the market opens on Wednesday, Lowe’s (LOW) will release its second-quarter earnings as well. Predictions for Lowe’s earnings include a $15.04 billion estimate, and an increase in earnings per share of 16% on a year-over-year basis.

So don't let the harsh Home Depot shares stress you out. According to a recent article by Yahoo! Finance, the Atlanta-based company boosted its full-year profit guidance to $3.60 a share, up from $3.52 (though still shy of the Wall Street consensus projection of $3.65).

The article also states that in the first half of 2013, Home Depot bought back $4.3 billion worth of stock, having bought in more than $10 billion over the prior three years. Home Depot says it intends to bid for another $2.2 billion by year’s end.

 

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