A wave of new homes being built this fall in the U.S. could lead to more nails and plywood being bought from Home Depot (HD) during the fourth quarter than many on Wall Street currently expect.
Construction on new homes spiked by about 26% in October to the highest level in nine years, according to new data released Thursday from the Commerce Department. Housing starts increased in all four regions last month. Home Depot's stock rose by as much as 3% in the wake of the news.
The latest read on starts comes as Home Depot has continued to benefit from the sustained rise in the U.S. home values. Rising U.S. home values are leading people to view investing in remodeling their homes as a wise decision, either opting to undertake projects themselves or hire an outside contractor.
"Our customer is looking at his or her home and saying it's worth more today than it was yesterday. So their home has more value, there is a wealth effect," Home Depot's CFOr Carol Tome told TheStreet in an interview this week.
Home Depot's third-quarter earnings came in at $1.60 a share, beating analysts' forecasts of $1.58. Net sales rose 6.1% to $23.2 billion, ahead of estimates for $23 billion. U.S. same-store sales rose a solid 5.9% from the prior year.
The company raised its full-year earnings forecast to $6.33 a share from $6.31 a share.
Home Depot told analysts on a conference call that sales to contractors -- which Home Depot calls 'Pro' customers -- outpaced the company's overall same-store sales increase and that sales of appliances rose by a double-digit percentage.