NEW YORK (TheStreet) -- Home Depot (HD) is makeing disaster investment efforts this year such as its nationwide water effort to help educate and enable residents in drought-affected areas. The specialty retail company stock rose 5%, to $81.50 in midday trading and closed down slightly at $80.98. Home Depot is expected to reach a $1.88 annual dividend per share for this year.
Many of the company's several disaster preparedness initiatives such as its water conservation workshops could spur sales growth and contribute to home improvement recovery.
According to PWC, 20 of the 30 most costly insured catastrophes worldwide from 1970 to 2011 have occurred since 2001. With the exception of the 9/11 terrorist attacks, they were all natural disasters.
Home Depot hosted a slew of water conservation workshops at 1,977 of its U.S. stores in April of this year. "We're committed to helping our customers solve everyday home improvement challenges, and for many, water conservation is one of those challenges," said Joe McFarland, president of the Western Division for Home Depot.
"We have the products and our associates have the know-how to help our customers identify water-saving solutions and implement them at home. These workshops help us to share that knowledge and inspire residents to take action."
Home Depot also recently began selling a new collection of smart home mobile device controlled products earlier this month in close to 2,000 of its U.S. stores.
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In a disaster, consumers seek the necessary tools to re-establish their homes. A significant investment is spent on behalf of American consumers on products which in return drive Home Depot's post-disaster sales and growth.
The Home Depot Foundation has donated over $80,000 in nonprofit partnerships. The company is also a member of the American Red Cross Annual Disaster Giving Program (ADGP) contributing $500,000 annually. The donations allow Red Cross to immediately reach individuals and families affected by disaster across America.
The retailer services a critical need for local communities when catastrophe strikes. The Home Depot Foundation and its associates are sought after during these crises for the right resources, support and products to rebuild.
Home Depot will evolve to meet demands for products and innovative solutions. According to PWC, demand for such services and products has already emerged and is likely to significantly increase in the next five years.
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For investors, Home Depot has a comprehensive disaster preparedness strategy in place to support community resilience. This in return, enables the company to be supportive within volatility in the market. Home Depot's initiatives demonstrate innovative approaches which are able to benefit communities during times of challenges.
Investors will find this type of growth attractive because of its low financial risk. As the housing market and consumer confidence improves, homeowners will also plan to purchase for home enhancements. Big retailers such as Home Depot and its competitor Lowe's (LOW) are set to perform well during this period. Both companies are expected to reach consistent double-digit profit gains in the coming quarters.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates HOME DEPOT INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate HOME DEPOT INC (HD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, impressive record of earnings per share growth, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- HD's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 2.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- HOME DEPOT INC has improved earnings per share by 20.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, HOME DEPOT INC increased its bottom line by earning $3.75 versus $3.00 in the prior year. This year, the market expects an improvement in earnings ($4.42 versus $3.75).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Specialty Retail industry average. The net income increased by 12.5% when compared to the same quarter one year prior, going from $1,226.00 million to $1,379.00 million.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, HOME DEPOT INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
- In its most recent trading session, HD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full analysis from the report here: HD Ratings Report