Home Depot (HD) - Get Report posted stronger-than-expected third quarter earnings and boosted its full-year profit guidance as the world's largest home improvement retailer saw solid same-store sales growth in the United States despite a slowing housing market.

Home Depot said earnings for the three months ending in September came in at $2.51 per share, topping the $2.26 estimate and rising 36.4% from the same period last year. Group revenues, the company said, rose 7.2% to $26.3 billion, narrowly beating the Street consensus. Comparable U.S. sales, Home Depot said, were up 5.4% while rising 4.8% across all markets. Home Depot said it now sees full-year earnings rising to as high as $9.75 per share on a diluted basis, up from a prior estimate of $9.42 and a Street consensus of $9.55, while same-store sales for the whole of 2018 should rise by 5.5%.

"We are pleased with our third quarter results and the growth that we saw from both our professional and do-it-yourself customers. Our customers continue to respond to our expansive assortment and enhancements we are making to drive an interconnected shopping experience. We saw continued strength across the store, as well as healthy growth in our digital business," said CEO Craig Menear. "We believe this is a testament to the overall strength of demand in the home improvement market."

Home Depot shares were sliding 3.5% in late morning trading Tuesday, to $173.234 a share, bringing the stock's year-to-date decline to almost 8%. This values the company now at $199.49 billion. 

Home Depot, as well as its main American rival, Lowes Corp. LOW, have tight connections to the U.S. housing market, which remains a key weakness in an otherwise booming economy as rising rates hold back demand and a slump in new building keeps supply at bay.

Last week, 30-year fixed mortgage rates, the most common form of borrowing, rose to a seven-year high of 4.94%, according to data from the Federal Home Loan Mortgage Corporation, or Freddie Mac, while the National Association of Home Builders said its affordability index fell to the lowest level in ten years. The Federal National Mortgage Association, or Fannie Mae's, home purchase sentiment index, a closely-watched metric for housing investors, also slipped 2 points this week to a one-year low of 85.7 points.

The Philadelphia Housing Sector Index, a measure of the twenty-biggest U.S. homebuilders, has fallen more than 9.2% over the fourth quarter and is down more than 24.8% for the year.

Last month, the Commerce Department said housing starts fell 5.3% in September to a seasonally-adjusted rate of 1.201 million units, while August numbers were revised lower to 1.268 million, as slowing construction in the south, which was impacted by Hurricane Florence, held down national growth.

That said, home prices in September rose by 5.6% from the same period last year, with every state apart from North Dakota registering gains, according to CoreLogic data, but that was the slowest pace since January 2017.

"Home price gains remain a positive catalyst for repair and remodel activity tied to rising owner's equity, though we expect rising inventory amid falling sales will continue to dampen price gains," wrote KeyBanc Capital Markets Kenneth Zener.