When you consider Home Depot has more than doubled the performance of rival Lowe's (LOW) during that span, there's little debate as to which of the two wins the title for head of household.
However, I have always had a tough time reconciling Home Depot's valuation to that of other leading retailers such as Wal-Mart (WMT) and Costco (COST). I'm not suggesting the stock lacks value. It's clear the Street has never minded paying a higher multiple for Home Depot. It's worked out very well over the past five years, yes. But how about the next five?
With revenue growth of more than 7% in the recent quarter, which outperformed the 1% sales decline posted by Lowe's, Home Depot is certainly doing its part to make this debate, well, not much of a debate at all.Unlike Lowe's, which is struggling with declining same-store sales (comps), Home Depot has figured out ways to not only capitalize on a revitalized housing recovery, but sustain its post-Hurricane Sandy momentum.
Profits soared 18%, helped by continued margin improvements including a year-over-year, 20-basis-point climb in gross margin. Operating margin expanded by 130 basis points contributing to a 22% surge in operating income. The company earned $1.22 billion, or 83 cents per share, which beat Street estimates by 8%. Equally impressive was the company posted a solid 4.3% growth in overall comps, which is the metric that tracks sales performances of stores that have been opened at least one year. Just to give you an idea of how impressive this is, Lowe's just posted 70 basis-point decline in comps while Wal-Mart U.S. comps dropped 1.4%.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV