Home Depot Inc (HD.N) raised its 2013 forecast for the third time this year as rising home prices encourage more Americans to invest in their properties and complete delayed projects.
Shares of the No.1 U.S. home improvement chain rose 3 percent after the company's quarterly profit beat analysts' estimates for the sixth quarter in a row.
Home Depot's third-quarter results gave fresh evidence that the U.S. housing market continues to heal after years of weakness. A bubble in the sector was at the core of the 2007-2009 financial crisis.
"The housing market continues to be a positive," Chief Executive Francis Blake said on a post-earnings conference call.
Blake said that although private fixed residential investment as a percentage of GDP improved again this past quarter to 3.2 percent, it remained well below the 60-year average of about 4.6 percent.
U.S. home prices have risen since early 2012 and economists have singled out housing as one of the bright spots of the economic recovery.
Prices jumped again in August despite a recent rise in mortgage rates and slowing demand for new homes, according to the S&P/Case Shiller composite index.
Chief Financial Officer Carol Tome said she did not expect a decline in home prices, which have been the biggest contributor to the company's sales growth this year.
The company has also improved distribution, cut costs and tailored marketing and merchandising efforts to local markets. Smaller rival Lowe's Cos Inc (LOW.N) is due to report results on Wednesday.
"If every earnings report was like Home Depot, we would have the easiest job in the world," Janney Capital Markets analyst David Strasser wrote in a note to clients.
Home Depot raised its 2013 earnings forecast to $3.72 per share from $3.60 and sales growth forecast to about 5.6 percent from 4.5 percent.
In the third quarter, Home Depot's net earnings rose to $1.35 billion, or 95 cents a share, from $947 million, or 63 cents a share, a year earlier.
Analysts on average expected a profit of 90 cents per share, according to Thomson Reuters I/B/E/S.
Sales rose 7.4 percent to $19.47 billion, beating the analysts' average estimate of about $19.18 billion. Sales at stores open at least a year rose 7.4 percent, with an 8.2 percent increase in the United States.
Home Depot said the number of customer transactions increased 4 percent and the average ticket rose 3.2 percent in the quarter.
The company's shares were up about 2 percent at $81.09 in morning trading on Tuesday. Shares of Lowe's were up 0.6 percent.
(Additional reporting by Sagarika Jaisinghani in Bangalore; Editing by David Goodman and Jeffrey Benkoe)