Home Depot Profit Tops Analysts’ Estimates on Housing

Home Depot Inc., the largest U.S. home-improvement retailer, posted third-quarter profit that topped analysts’ estimates and boosted its earnings forecast as rising home prices spurred homeowners to splurge on renovations.

Net income in the three months ended Nov. 3 rose 43 percent to $1.35 billion, or 95 cents a share, from $947 million, or 63 cents, a year earlier, the Atlanta-based company said today in a statement. The average of 23 analysts’ estimates was 90 cents, according to data compiled by Bloomberg.

The one-and-a-half year gain in the U.S. housing market is giving consumers the confidence they need to remodel kitchens and bathrooms. The number of transactions in the quarter increased 4 percent to 344.3 million while the average purchase climbed 3.2 percent to $56.27, Home Depot said today.

There has been “a greater willingness on the part of consumers to fund large and small projects,” Alan Rifkin, an analyst at Barclays Plc in New York, said in a note Nov. 14. He rates Home Depot overweight, the equivalent of a buy, and said higher demand by shoppers is “likely to remain intact despite concerns about macro events such as higher interest rates.”

Profit per share in the fiscal year through January will be $3.72, Home Depot said today. That’s up from a previous forecast of $3.60 and is higher than analysts’ average estimate of $3.70.

Home Depot rose 0.9 percent to $80.38 at the closing in New York. The shares have advanced 30 percent this year, compared with a 25 percent gain for the Standard & Poor’s 500 Index.

‘Steady Improvement’

Chief Executive Officer Frank Blake said in September that rising home prices would lift renovation spending even as higher mortgage rates pressured the housing market. The average rate for a 30-year fixed mortgage climbed to 4.35 percent last week, a full percentage point higher than at the end of last year, according to Freddie Mac, the government-owned mortgage insurer.

The housing market will improve “not at a blistering pace but a steady, steady improvement,” Blake, 64, said in an interview at Bloomberg’s New York headquarters on Sept. 5.

Prices for single-family homes climbed in 88 percent of U.S. cities in the third quarter as buyers competed for limited inventories that included fewer discounted foreclosures, according to a report from the National Association of Realtors earlier this month.

The nationwide median price for an existing single-family home rose 12.5 percent in the third quarter from a year earlier to $207,300, the group said.

Home Depot’s third-quarter revenue increased 7.4 percent to $19.5 billion, topping analysts’ $19.2 billion average estimate. Sales at stores open longer than 12 months rose 7.4 percent, including an 8.2 percent gain at U.S. locations. Comparable-store sales may rise 7 percent this year, the company said today. That’s up from a previous forecast for a gain of as much as 6 percent.

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