Home Depot profit tops estimates as housing market recovers

Home Depot Inc., the largest U.S. home-improvement retailer, posted first-quarter profit that topped analysts’ estimates and raised its forecast for earnings this year as the housing rebound boosts renovation spending.

Net income in the quarter ended May 5 rose 18% to $1.23 billion, or 83 cents a share, from $1.04 billion, or 68 cents, a year earlier, the Atlanta-based company said today in a statement. Analysts projected 76 cents, the average of 25 estimates in a Bloomberg survey.

Home Depot is benefiting from rising U.S. home prices that are giving homeowners the confidence to start projects and spend more. Revenue rose 7.4% to $19.1 billion, topping analysts’ $18.6 billion estimate, as the average customer purchase increased 5% to $57.24.

Spending rose on “consumers’ confidence to invest in higher ticket projects,” John Tomlinson, an analyst at ITG Investment Research in New York, said today in an e-mail. His company doesn’t rate shares.

Profit this year will be $3.52 a share, up from a previous estimate of $3.37, the company said today. The guidance includes the effect of share repurchases the company already has made and plans to make this year. Analysts estimated $3.54, on average.

Residential real-estate prices rose in February by the most since May 2006, with the S&P/Case-Shiller index of house values in 20 cities up 9.3% from a year ago.

Home Depot rose 3.8% to $79.68 at 7:26 a.m. in New York. The shares advanced 24% this year through yesterday, compared with a 17% gain by the Standard & Poor’s 500 Index.

Transactions Increase

The retailer had about 337.1 million customer transactions in the quarter, up 2.5% from a year earlier. Sales at stores open longer than a year rose 4.3%, including a 4.8% gain in the U.S.

Home sales in the U.S. probably rose in April to the highest level in more than three years, economists said before reports this week. Combined purchases of new and existing residences climbed to a 5.41 million annualized rate last month, the highest since November 2009, according to the median forecast of economists surveyed by Bloomberg ahead of figures from the National Association of Realtors and the Commerce Department.

The projected pace of total home sales last month would be the highest since a tax credit for first-time homebuyers first expired in November 2009. It would be the third-highest since August 2007, four months before the start of the last recession.

Lowe’s Cos., the second-largest home improvement retailer, is scheduled to report quarterly results tomorrow.

(Home Depot will hold a conference call for analysts at 9 a.m. New York time. Click HD US <Equity> EVTS <GO> to listen.)

Bloomberg News

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