NEW YORK ( TheStreet) -- I was chided two months ago when I told investors that shares of Home Depot (HD - Get Report), which were then coming off a strong May quarter report, were not as attractively priced as rival Lowe's (LOW), which, by contrast, had posted a disappointing first quarter.
Two months later, it seems the Street agrees. Home Depot has traded flat to slightly down while Lowe's has been up by more than 12%.
I'm not going to overstate what this means. A two-month performance does little to erase the fact that shares of Home Depot, which have soared more than 190% over the past five years, more than doubled Lowe's performance during that same span. But that's exactly the point. The Street has always loved this stock. What are the odds this love affair will last for the next five years? If this recent quarter was any indication, Home Depot is determined to make it a hard breakup.
It's not often that I get excited about an earnings performance. But what Home Depot managed to do was pretty remarkable. Not only did the company post revenue growth of more than 9%, but same-store sales (comps), which track the performances of stores that have been opened for at least one year, surged closed to 11%. This is an astounding number, especially since the Street was looking for same-store sales growth of just 7%.
Here again, I want to be careful to not exaggerate the meaning of this number. But just to put it in proper perspective:
just posted flat comps, while the Street would have been happy if Wal-Mart had only delivered 1% growth. Likewise,
just recently posted
1% growth in comps
. Obviously, McDonald's and Home Depot are in completely separate businesses. But it's still consumer spending.
What's more, you would have to go back to 1999 to find when Home Depot performed so well in terms of U.S. comps. Clearly, the company knows what it's doing. The Street is more than justified for wanting to "build a position" in Home Depot.
My issue, though, is given the stock's strong uptrend over the past five years, which was spurred by the housing recovery, I just don't believe there's much outperformance left.