Home Depot forecasts 2014 profit growth trailing estimates

Home Depot Inc., the largest U.S. home-improvement retailer, forecast 2014 earnings growth that trailed some analysts’ estimates while also saying it would meet a profitability goal earlier than expected.

Earnings per share in the year ending January 2015 will rise about 17% to about $4.35, the Atlanta-based company said today in a statement. That trailed the average analyst estimate of $4.43 compiled by Bloomberg. Sales will rise 5% over the period, matching analysts’ estimates.

Homeowners, buoyed by a one-and-a-half year gain in U.S. housing prices, are spending more on remodeling kitchens and bathrooms, helping the company post profit that has topped analysts’ estimates for six straight quarters. Home Depot, led by Chief Executive Officer Frank Blake, last month posted third- quarter profit that topped analysts’ estimates and boosted its earnings forecast.

“They tend to guide conservatively, so that guidance for 2014 is very attainable,” Michael Souers, an analyst for Standard & Poor’s in New York, said in an interview. “They have done a tremendous job with margins as the housing market has picked up. After several years of neglect, homeowners are re- investing in their homes.”

Souers recommends selling Home Depot’s shares because he said the housing market is likely to slow with increased borrowing costs.

Home Depot rose 1% to $79.38 at 9:46 a.m. in New York. The shares had gained 27% this year through yesterday, while competitor Lowe’s Cos., based in Mooresville, North Carolina, was up 33%.

Share Repurchases

Home Depot also said it will reach an operating margin of 12% for the year ending in January 2015, a year earlier than it expected. The company anticipates share repurchases of about $5 billion and capital spending of $1.5 billion.

Lowe’s, the second-largest U.S. home-improvement chain, has dropped 6.1% since Nov. 19, the day before it posted third-quarter profit that trailed analysts’ estimates as it works to match Home Depot’s growth in an improving housing market.

Home Depot has more than 300,000 workers and had 2,260 retail stores at the end of the third quarter. The chain plans to open eight stores next year.

The company will discuss its financial targets today at an investor and analyst conference that began at 9 a.m. New York time.

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