After a dismal week of missed earnings estimates from department stores, Tuesday morning saw home improvement giant Home Depot Inc. (NYSE: HD) blow past estimates and raise its guidance for the full fiscal year. While Home Depot’s results are outstanding compared with the recent bad news from the likes of Macy’s and Nordstrom, there is a very good chance that given the expected strength in the home remodeling market in 2016 and 2017, the company could be too timid in its forecast.
Home Depot reported diluted net earnings per share of $1.44 in the first quarter, up 19% compared with last year’s first quarter, and nearly 6% higher than the consensus estimate. Revenues of $22.8 billion were up 9% year over year and nearly 2% above the consensus estimate.
The company raised its sales guidance from a prior range calling for a year-over-year increase of 5.1% to 6.0% to a new total of 6.3%. Same-store sales, previously forecast to rise by 3.7% to 4.5%, are now forecast to rise 4.9%. Guidance for diluted earnings per share was boosted from a prior range of $6.12 to $6.18 to a new total of $6.27.
In April the Remodeling Futures Program at the Joint Center for Housing Studies at Harvard University released its most recent report on home improvement and repair spending. According to their benchmark study, home remodeling and repair spending will increase to about $310 billion (up 8.6%) in the fourth quarter of 2016 and rise to almost $324 billion (up 9.7%) in the first quarter of 2017. The estimate for the first quarter of this year called for spending of about $295 billion, up 4.7%.
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