Updated from 8:18 a.m. EST include executive comments from the earnings call.
NEW YORK ( TheStreet) -- Home Depot's ( HD) better-than-expected third-quarter earnings shed light on two important trends in the U.S. housing market: consistent home price appreciation and strength in new home sales.
Each are spurring remodeling activity among consumers and bigger orders from professionals that work on construction sites.Must Read: Royal Caribbean Is About to Sail to China on Much Cheaper Fuel
Home Depot reported third-quarter EPS of $1.15; analysts were expecting $1.13 a share. Underpinning the earnings outperformance was a U.S. same-store sales increase of 5.8%.
The key U.S. housing market trends that have helped Home Depot's business showed up in the retailer's average ticket. In the third quarter, average ticket rose 2.3% from last year, following gains of 1.8% in the second quarter and 0.6% in the first quarter.
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Strength in Home Depot's average ticket implies that contractors continue to experience favorable demand for their services, especially from baby boomers who are no longer physically able to undertake repair projects around the home.
On the earnings call, Home Depot's new CEO Craig Menear said sales growth from "high spend pro customers," which the company defines as those who spend more than $10,000 a year at the chain and represent 13% of its pro business, rose at "two-times" the company average in the quarter. It also marked the 11th quarter in a row sales from the high spend pro category advanced.
The contractor segment makes up about 35% of sales for Home Depot, compared to 25% for smaller rival Lowe's (LOW) .
Quicker growth in the average transaction value metric further suggests homeowners are opting for more expensive remodeling projects, such as kitchen upgrades and appliance purchases, given consistent home price appreciation.
The notion was hinted at by a Macy's (M) executive last week. "We also see positive factors in the economy, lower gas prices, lower unemployment and healthy financial markets," said Macy's Chief Financial Officer Karen Hoguet on an earnings call with analysts. She added, "We are, however, balancing these factors with the reality of the recent trend caused in part by customer spending more their disposable dollars on categories we don't sell like cars, health care, electronics and home improvement."
Demand on the part of do-it-yourself home remodelers has not let up in November for Home Depot. "I am impressed with sales in the first two weeks of November," said Chief Financial Officer Carol Tome on the earnings call.
According to the National Association of Realtors, the median price of an existing home rose 4.9% year over year in the third quarter. Sales increases were reported in all major regions of the country.
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