* Earnings of 74 cents a share beat 70-cent Wall Street view
* Sales rise nearly 5 percent, exceed analysts' estimates
* Company raises full-year sales and profit forecasts
* Shares rise more than 4 percent
By Martinne Geller
Nov 13 Home Depot Inc raised its
full-year outlook on Tuesday, even before considering any future
sales lift from superstorm Sandy, as the retailer benefited from
a recent uptick in the U.S. housing market.
The nascent recovery in housing has encouraged professional
contractors to buy more in recent months. Home Depot, the
world's largest home improvement chain, has also gained from its
own efforts to improve distribution, cut costs and localize
marketing and merchandising.
Janney Capital Markets analyst David Strasser said Sandy
"will certainly help the home improvement sector in the next few
quarters". The fact that Home Depot's new forecast does not
include those benefits was helping to push up the stock, he
said, along with "further evidence of a company running on all
Shares of Home Depot, which also beat analysts' quarterly
earnings and sales estimates, were up 4.2 percent at $63.72 in
"Sales were considerably higher than we had anticipated,"
said Chief Financial Officer Carol Tome in an interview. "The
whole store performed better than expected."
"We believe we're on a path to recovery. We're not there,
but we're on a path," she said.
The U.S. housing market, which is being buoyed by low
interest rates and falling inventories, is becoming "an assist
to growth, rather than an anchor," added.
Rising sales are pushing down the stock of unsold properties
on the market, lifting prices and giving builders more
confidence to take on new projects.
The company said it had rung up $70 million in third-quarter
sales to consumers who stocked up on flashlights, batteries,
generators and extension cords before Sandy slammed into New
Jersey on Oct. 29, the day after the quarter ended. Home Depot
expects a bigger sales boost ahead because of rebuilding
efforts, but could not pinpoint its magnitude or timing.
Home Depot raised its full-year sales growth forecast to 5.2
percent from 4.6 percent.
The company said it expected earnings of $3.03 a share,
excluding an 11-cent charge for closing stores in China. Its
prior full-year forecast, given before news of the China
closures, called for a profit of $2.95 per share.
The new forecast implies fourth-quarter earnings of 62 cents
per share, according to Janney Capital Markets analyst David
Strasser. That is one cent higher than analysts' average
estimate, according to Thomson Reuters I/B/E/S.
Home Depot derived about $360 million in incremental sales
from Hurricane Irene last year, whose strong winds tore off
roofs and caused trees to fall on homes.
So far, estimates are pegging property damage from Sandy at
around $20 billion, Tome said, versus about $16 billion from
"With Sandy sadly, this is structural. Homes are destroyed,"
said Tome. "It's more like Katrina, and if you think about
Katrina, the rebuilding continues in New Orleans."
So far in November, sales have been "quite good," Tome said,
with strength in the southern and western parts of the country,
which the storm did not affect.
The company's outlook reflects plans to buy back $700
million in additional shares this quarter, which would bring the
total value of repurchases for the year to $4 billion.
Net earnings rose to $947 million, or 63 cents per share, in
the third quarter from $934 million, or 60 cents per share, a
Excluding a charge for closing seven stores in China, Home
Depot said earnings were 74 cents per share. On that basis,
analysts were expecting 70 cents.
Sales rose nearly 5 percent to $18.13 billion, topping
analysts' estimates of $17.93 billion.
Sales at stores open at least a year increased 4.2 percent
globally, including a 4.3 percent rise in the United States.
Edward Jones analyst Robin Diedrich was expecting same-store
sales growth of just above 3 percent.
"Things are going pretty well for them, with sales remaining
strong," said Diedrich, who has a "hold" rating on the shares
due to their valuation. "The stock has done extremely well and
trades at quite a premium to the rest of retail."
Home Depot has been taking market share from rival Lowe's
Cos Inc with the help of better pricing and customer
service, analysts have said. Lowe's, which has lagged Home Depot
in same-store sales for 13 straight quarters, plans to report
its results next week.