Home Depot's earnings powered by strong U.S. housing market

(Reuters) - Home Depot Inc's HD.N profit and revenue topped Wall street estimates for the sixth straight quarter as more shoppers visited the No.1 U.S. home improvement chain and, on average, spent more in an improving housing market.

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Shares of Home Depot, which raised its quarterly dividend by 15.7 percent to $1.03 per share, were up about 1.4 percent at $189.55 in morning trading. They rose more than 4 percent premarket.

The U.S. housing market has been on a winning streak, helped by rising employment and higher wages. That has encouraged homeowners to buy new homes or remodel existing ones, benefiting Home Depot and smaller rival Lowe's Cos Inc LOW.N.

“The U.S. economy is strong and tax reform is net positive for the housing industry,” Chief Financial Officer Carol Tome said on an earnings call.

“We expect higher job growth, higher income growth, and higher mortgage rates. But with that comes higher home price appreciation and rising housing demand, which should drive home improvement spending,” she said.

However, Home Depot’s comparable store sales growth forecast for its current fiscal year was shy of analysts’ estimates. But that did not deter Wall Street’s expectations.

“The outlook will prove conservative given continued momentum in housing and the company’s ability to execute,” Telsey Advisory Group analyst Joseph Feldman said.

Home Depot's results are in contrast to that of Walmart Inc WMT.N, which on Tuesday reported a lower-than-expected quarterly profit and posted a sharp drop in online sales growth during the holiday period.

Home Depot said sales at its stores open for more than a year rose 7.5 percent in the fourth quarter ended Jan. 28. That beat analysts’ average estimate of a 6.5 percent increase, according to Thomson Reuters I/B/E/S.

Customer transactions rose 2 percent, while the average check value rose 5.5 percent.

The company expects comparable store sales growth of 5 percent in the current fiscal, while analysts were expecting a 5.4 percent increase.

The retailer’s quarterly net sales rose 7.5 percent to $23.88 billion, beating estimates of $23.66 billion.

Home Depot’s profit rose 2 percent to $1.78 billion, or $1.52 per share, though growth was curbed by a $127 million charge related to the U.S. tax law changes.

Its adjusted earnings of $1.69 per share beat analysts’ estimate of $1.61.

Reporting by Aishwarya Venugopal in Bengaluru; Editing by Savio D’Souza and Sayantani Ghosh