(Reuters) - Home Depot Inc’s (HD.N) quarterly results beat Wall Street estimates as a warm winter boosted sales at the world’s largest home improvement chain by pulling some spring demand forward.
The retailer also gave a better-than expected profit outlook for the current year, just days after a report showed U.S. homebuilder sentiment had risen in February to its highest level in more than four years. That report raised hopes that the housing market was stabilizing.
The results from Home Depot drove its shares up 3.3 percent to $48.26 on Tuesday morning and made some analysts more optimistic about the retailer’s future prospects.
“The most important part of Home Depot’s strong performance and continued beat and raises is that they are occurring prior to any sustained housing recovery,” Credit Suisse analyst Gary Balter said.
The company’s earnings power will rise significantly once the housing market and the economy improve, Balter added.
Besides the warm winter, Home Depot benefited from having more centralized distribution centers and from recent efforts to shift more employees to jobs where they serve customers directly. It has also been cutting costs more quickly than smaller rival Lowe’s Cos Inc (LOW.N), which is due to report its results next week.
For the current year, Home Depot forecast earnings of about $2.79 a share, while analysts expected $2.77.
Balter and other analysts said the outlook was conservative.
“This guidance could be construed as not enough,” Janney Capital Markets analyst David Strasser said, but added that the company had a history of being conservative in its outlook.
Home Depot’s quarterly sales rose 5.9 percent to $16.01 billion in the fourth quarter ended on January 29, well ahead of the analysts’ average estimate of $15.51 billion compiled by Thomson Reuters I/B/E/S.
Sales at stores open at least a year rose 5.7 percent globally, including a 6.1 percent rise in the United States.
Unusually warm temperatures in many parts of the country helped same-store sales by 2 to 2.5 percentage points, Strasser said, adding that demand was very strong for flooring products.
Net income rose to $774 million, or 50 cents a share, from $587 million, or 36 cents a share, a year earlier. Analysts on average were expecting a profit of 42 cents a share.
Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn and Maureen Bavdek