Home Depot Profit Tops Estimates as Fix-Up Spending Marches On

  • Retailer boosts dividend, authorizes $15 billion share buyback
  • Housing-price gains have kept consumers renovating their homes

Home Depot Profit Gain Prompts Dividend Boost

If Home Depot Inc.’s results are any indication, Americans are showing no sign of putting down their tool belts.

Profit increased to $1.44 a share last quarter, the Atlanta-based company said Tuesday. That topped analysts’ estimates and came along with strong sales and a plan to return more cash to shareholders.

The largest home-improvement retailer is benefiting from a yearslong rebound in housing prices that has made homeowners more willing to spend on their properties because they see them as a sound investment. That’s helped Home Depot avoid the malaise that has spread across much of retail, where lackluster demand has weighed on results.

“The market had growing fears around trends in the home-improvement category due to rising interest rates and a commensurate drop in mortgage refinancing -- which is often used for larger projects,” David Schick, director of research and lead retail analyst for Consumer Edge Research, said in an e-mail. “Home Depot fourth-quarter results and guidance reconfirmed consistent demand and the structural strength of their business model.”

The shares rose as much as 1.9 percent to $145.65 in New York. Home Depot already had gained 6.7 percent this year through Friday.

Revenue climbed 5.8 percent to $22.2 billion in the fourth quarter, which ended Jan. 31, surpassing analysts’ $21.8 billion projection. Sales at stores open for more than a year -- a key benchmark for investors -- rose 5.8 percent. That beat analysts’ 3.5 percent prediction, according to Consensus Metrix.

Home Depot said it plans to funnel more cash back to shareholders. The board boosted the company’s quarterly dividend 29 percent to 89 cents a share. The company increased its targeted dividend-payout ratio to 55 percent of net earnings, up from 50 percent. The board also authorized a $15 billion share-buyback program, replacing its previous plan.

Earnings Forecast

The company forecast that sales this year would rise 4.6 percent, which would work out to revenue of about $99 billion, and that profit would hit $7.13 a share. Analysts projected revenue to be $98.5 billion and profit to be $7.16 a share.

Home price gains accelerated in the fourth quarter, with increases reported in 89 percent of U.S. metropolitan areas, as competition heated up for a record-low supply of listings, the National Association of Realtors said earlier this month.

Job growth is fueling demand in a market starving for listings. The number of previously owned homes available for sale at the end of December dropped 6.3 percent from a year earlier to 1.65 million, the fewest since the realtors group started tracking the data in 1999.

— With assistance by Prashant Gopal

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