While the likes of Macy's (M) - Get Macy's Inc Report , J.C Penney (JCP) - Get J. C. Penney Company, Inc. Report and Target (TGT) - Get Target Corporation Report are fresh off disastrous holiday seasons, Home Depot (HD) - Get Home Depot, Inc. (HD) Report once again rode the powerful U.S. housing recovery to financial success.
The home-improvement retailer posted a monster earnings beat on Tuesday, delivering fourth-quarter earnings of $1.44 a share vs. analysts' expectations of $1.33. Same-store sales rose a solid 5.8%, surpassing Wall Street estimates for a 3.5% increase. Home Depot's same-store sales in the U.S. gained 6.2%, likely helped by continued demand for building materials from contractors and appliances on the part of consumers.
The company hiked its quarterly dividend by 29% and enacted a new $15 billion share repurchase program. For 2017, Home Depot sees earnings of $7.13 a share, slightly below analysts' forecasts of $7.17. Same-store sales growth is expected to cool a bit relative to 2016 to an increase of 4.6%.
Home Depot shares finished the session 1.3% higher at $145.02.
U.S. single family home values continue to trend higher. Source: Zillow
Despite the post-election rise in mortgage rates that has made buying a home more expensive, the backdrop for Home Depot and other companies tied to the U.S. housing recovery such as appliance maker Whirlpool (WHR) - Get Whirlpool Corporation (WHR) Report remains favorable. Home values are still rising and the employment market is healthy, which is spurring people to invest in home remodeling projects.
The national median existing-home price in the fourth quarter was $235,000, up 5.7% from a year ago, according to the National Association of Retailers (NAR). The median sales price of a single-family home increased in 158 out of 178 metropolitan areas during the fourth quarter, or about 90% of these markets, the NAR said.
The home remodeling index reached a new all-time high of 106.1 in the fourth quarter, a 4.5% increase from a year earlier, noted Metrostudy. The index has now seen nineteen consecutive quarters of year over year gains dating back to 2011.
Meanwhile, the construction of new homes amid tight supply continues to fuel demand for building materials such as plywood and shingles by contractors. Housing starts are fresh off their strongest year since 2007. Existing home sales clocked in at 5.45 million for 2016, up from 5.25 million notched in 2015.