The impact of the harsh winter on the housing market is fizzling out, as Home Depot (HD) records robust May sales. And investors and the stock market are basking in the good news.
Home Depot’s stock surged after its first-quarter earnings release, with its stock up 2.65% midday Tuesday.
“When we wrote our 2014 sales plan, it was based on U.S. GDP growth forecast of approximately 3%. It also assumes that we would have a normal winter and that commodity prices would remain fairly stable,” said Carol Tomé, executive vice president of corporate services and chief financial officer with Home Depot.
“So what has changed,” Tomé asked. “Well, we didn’t have a normal winter, but we believe that most of the sales lost to snow on the ground during the first quarter will be realized in the second quarter.”
Despite the harsh winter, investor forecast for the year is still in the 3% area.
And while housing statistics are not as robust as they were last year, they are not materially different from the assumptions Home Depot used to build its plans.
But the positive news: May sales are robust.
“We are reaffirming the sale guidance we laid out on our fourth-quarter earnings call and we expect fiscal 2014 sales to increase by approximately 4.8%,” Tomé continued.
The home improvement store posted net earnings for the first quarter of $1.4 billion, or $1 per share, compared with $1.2 billion, or $0.83 per share, for the same period in 2013.
This beat analyst earnings per share expectations by $0.01.
However, a report from Briefing.com said that although the store reported weaker earnings than the store expected, a subsequent indication that May sales have been "robust" and a reiteration of its full-year guidance have been placating factors.
“Shares of HD are up 1.9% and are providing a measure of support for the Dow and the broader market,” the report said.