Home Depot Profit Tops Analysts’ Estimates on Housing

Home Depot Inc. posted fourth-quarter profit that topped analysts’ estimates as shoppers spent more on projects and Hurricane Sandy repairs. The company also raised its dividend and approved a $17 billion share buyback.

Net income rose 32 percent to $1.02 billion, or 68 cents a share, from $774 million, or 50 cents, a year earlier, the Atlanta-based company said today in a statement. Excluding a favorable adjustment to a charge to close stores in China, profit was 67 cents a share. Analysts projected 64 cents, the average of 24 estimates in a Bloomberg survey.

Rising home values are encouraging consumers to spend more on remodeling, and Home Depot, the largest U.S. home-improvement retailer, benefited from $242 million of sales related to Hurricane Sandy repairs in the quarter. The average purchase rose 5.6 percent to $55.46, the company said.

“As housing prices have stabilized and started to improve in many regions of the country, homeowners have a propensity to make those bigger-ticket remodeling decisions and purchases,” John Tomlinson, an analyst at ITG Investment Research in New York, said today in a telephone interview. “Spending on storm recovery is going to be higher-ticket and stronger than the typical repair for maintaining the home.”

Tomlinson’s firm doesn’t rate shares.

Home Depot rose 5.7 percent to $67.56 at the close in New York, the biggest increase since May 18, 2009. The shares added 44 percent in the past 12 months, compared with a 35 percent gain for Lowe’s Cos., the second-largest U.S. home-improvement retailer.

Share Buyback

Home Depot said it plans to repurchase $17 billion of stock by the end of its fiscal 2015. The company also increased its quarterly dividend 34 percent to 39 cents a share, payable March 28 to shareholders of record March 14.

Home Depot today followed Lowe’s in forecasting profit for the current fiscal year that trailed analysts’ estimates. Home Depot said profit this year will be about $3.37 per share, while analysts estimated $3.49, on average.

Lowe’s said yesterday that profit this year will be about $2.05 a share. Analysts’ estimated $2.10. Spending on store improvements and hiring will weigh on the Mooresville, North Carolina-based company’s earnings in 2013, Chief Financial Officer Robert Hull told analysts on a conference call.

Economic Growth

Home Depot’s guidance anticipates “modest” growth of gross domestic product in 2013, Chief Executive Officer Frank Blake told analysts today. He likened the housing recovery to a “gradual thawing process,” while Chief Financial Officer Carol Tome said the company doesn’t expect a full recovery of housing this year.

U.S. take-home pay has shrunk this year after Congress let the tax that funds Social Security benefits revert to 6.2 percent from 4.2 percent. Job openings in the U.S. dropped in December from a four-year high as wrangling over tax and spending programs by lawmakers made employers cautious.

“With all of these unknowns -- the impact of payroll tax increases and lackluster job growth -- they are not going to start off the year with an overly bullish EPS outlook,” Tomlinson said of Home Depot.

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