NEW YORK (AP) — Home Depot Inc.'s net income rose slightly in the third-quarter, as glimmers of a housing market recovery start to appear. Storm-preparation also added to sales and offset costs related to closing stores in China.
Results beat expectations and the company also raised its forecast for the year. Shares rose nearly four percent.
Home improvement companies have long been under pressure due to the weak housing market, as consumers cut back on large-scale renovation projects. But they stand ready to benefit as evidence mounts that the housing market is slowly improving.
Superstorm Sandy also spurred sales, but executives were cautious about forecasting how much they thought they would benefit from the storm due to the extensive damage and slow recovery.
"Our customers are still very much in turmoil," said CFO Carol Tome.
Sandy devastated the East Coast at the end of October, shortly after the quarter ended. Its damage was still being dealt with, as evidenced by one question from an analyst.
"Can you get more generators in your store in Vauxhall, N.J.?," asked Credit Suisse analyst Gary Balter semi-seriously.
In the last week of the third quarter, the company garnered a $70 million lift from sales of batteries and flashlights, generators and extension cords.
Ultimately the company said it expects Sandy will generate about as much revenue as last year's Hurricane Irene, which garnered $360 million in sales off of $16 billion in hurricane damage. Sandy has caused $20 billion in damage, so sales could be greater. But they're different types of storms, with Irene causing more wind damage and Sandy causing more flooding, so the total benefit and timing is uncertain.
The slowly improving housing market was another focus for the quarter. Data shows the housing market is slowly improving, with U.S. home prices and new home sales pace increasing, although they remain well below peak levels.
Home Depot's CEO Frank Blake said both contributed to quarterly results.
"Our third-quarter results were better than we expected and reflected, in part, what we believe is the start of the path toward the healing of the housing market," he said in a statement.
In a call with analysts, he added that he sees the housing market becoming "an assist to our growth rather than an anchor."
Customer transactions over $900, about 20 percent of sales, rose 4.3 percent during the quarter, driven by purchases of appliances, flooring and kitchens.
Blake's statement signaled a "stronger tone" on the housing market than in prior quarters, said NBG Productions analyst Brian S. Sozzi, who called the remarks encouraging.
It remains to be seen whether Home Depot's smaller rival Lowe's Cos. will echo the sentiment in reports expected on Monday.
For the period ended Oct. 28, Home Depot Inc. reported net income of $947 million, or 63 cents per share. That's up from $934 billion, or 60 cents per share, a year earlier.
Excluding a charge for closing some stores in China, earnings were 74 cents per share.
During the quarter, Home Depot said it would close its big-box stores in China after failing to make a dent in the market.
"After several years of effort, we concluded that we could not make our big box retail model profitable there," Blake said.
That topped the 70 cents per share that analysts surveyed by FactSet predicted.
Revenue rose more than 4 percent to $18.13 billion. Wall Street expected $17.92 billion.
For the year, Home Depot now expects net income of $3.03 excluding the costs of closing stores in China, reflecting share repurchases. It previously forecast $2.95 per share.
It anticipates revenue will climb about 5.2 percent. Based on 2011's revenue of $70.4 billion, this implies $74.06 billion. Home Depot's prior forecast was for a 4.6 percent increase, which implied revenue of $73.63 billion.
Analysts expect earnings of $2.99 per share on revenue of $73.68 billion.
Shares rose $2.22, or 3.6 percent, to close at $63.38 Tuesday after rising to a new high for the year of $64.44 earlier in the session.
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This Week’s Celebrity Instagrams (11/26-12/2)
30 photos Launch gallery
1. Little Legend and Puddy 😍😍😍😍
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2. "You on point Phife?" "all the time,Tip". 💥 #bannedfromnormal
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3. Vegan! The Impossible burger at Crossroads
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4. Lawrence #BeforeandAfterEpisodes 1-4: 184lbs 13% body fatEpisode 8: 196lbs 8% body fat S/O @coachdaveboxing with the works outs and @kildareriordan with the nutrition
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5. Jus haaaanngin out
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6. Meanwhile back at home in Atlanta GA someone mad they not on the 🛳. 😳
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7. No limits... Photo cred: Chris Bridges @ludacris
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8. new new
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9. Apparently my 260lbs is too much for the actual vines in the Hawaiian jungles to hold me without breaking and me falling hundreds of feet. So for safety purposes, I'm forced to swing thru #Jumanjj on wires strong enough to hold 12 adult buffaloes and 1 adult Rock. #OnSet #Jumanji #IronicallyIEatBuffaloDailyForLunch #MoreManThanNatureKnowsWhatToDoWith
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10. hey ma! 🎎#wcw 💙
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11. Surprise visit to our factories!!! #GoodAmerican #USA
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13. Peachy Keen 🔥✨⚡️
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14. If this don't look thankful I don't know what does. Happy Thanksgiving to you and yours. #UltraBlessed #24kMagic #SweetPotatoFly
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15. Late nights @nbcmarlon with the writers... we in here!!!
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16. There goes my baaaaaaaaabbbbyyyyy #QueenKingMagic!!! We're up to something! Ira BIG!!! Stay out our buisness -
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17. You want to win every game you play but when you come home to these faces... who cares. #ILoveYouGirls best part of my day, everyday!
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18. Steady,steady..... full size jenga.. "I got this one "???? Or do I ?
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19. Cornrows kind of day 😉@dontaysavoy2 you convinced me and I love. ❤️️
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20. #BrotherlyLove #tbt
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22. #basel #TeamLOVE @kingcombs
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23. Just introduced a special screening of @directher 's groundbreaking (must see) documentary @13thfilm with my brother @themichaelealy | @unitedblackout #blackoutblackfriday
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24. Me & Vanessa Williams giving #DuckLips #Pose on the set of #DaytimeDivas @vh1 - Coming Soon to a tv near you. Lol. - My make up done by @makeupsurgeon
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25. This picture just makes me wanna praise the Lord, you hear me!!!!!! Yes Lord brotha #TEDDYCAMPBELL What a #man !!! You are everything right on this picture husband ......... #gorgeous #stylish #classy #strong #masculine #king #sexy #debonair #gentlemenstyle And that #bible in your hand just seals the deal for me (probably cause i know that, that is what helped you become just as amazing as you look😘). While my heart and mind experiences the goodness of God at #church on Sundays, my eyes experiences the goodness of Teddy😍. Amen somebody🙌🏽. "Bless the Lord oh my soul and all that is within me bless his holy name" #myman #myhusband #goodman #blackman #dapperman #godlyman #goodfather #mybestfriend
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26. Yesterday was my mama's 53rd birthday!!!!! Got to celebrate with her all day. If this is what I have to look forward to I can't wait. Looking like a soft bucket a cocoa butter. Yaaaaaaaaaas! 😍😍😍 love you mommy!
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27. "Shout out to @PureAtlanta for getting the family right"....I'm loving this jogger. 😍😍
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28. This pic warms my heart ❤️ #myLogiebeans and aunt aunt umba @itowandabraxton 😘
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29. You will always be my baby😜. #HappyBirthdayReginae #mybaby18
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30. GC "Gods Child" Red on Red SweatSuit available now at www.MonicaApparel.com ... Take Your Crown wherever you go!! I'm pictured in a Medium... Go to the site now for other options ... cc: @trukernell
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