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Home Depot, an earnings beat & raised guidance

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Home Depot, an earnings beat & raised guidance

Shares of the nation’s largest home improvement retailer rose by 3% in early trading on Tuesday as the company reported a better than anticipated second quarter. On the back of the housing recovery, the company was able to beat on both the top and bottom lines. Home Depot (NYSE:HD) watched its earnings rise greatly to $1.8 billion, or $1.24 per share. On a year over year basis earnings per share rose by more than 22% from the $1.01 earned in the second quarter of last year. Revenue for the company climbed more than 9% to $22.52 billion, from $20.57 billion. Analysts consensus estimates had predicted the company to generate only $1.21 in earnings per share on revenue of $21.79 billion.

Over the last few weeks shares of Home Depot have come under pressure as rising interest rates have caused some to fear the housing recovery. In a matter of months interest rates on mortgages have jumped from their historic lows. The interest rate on the 30 year mortgage is up nearly 100 basis points to 4.5%. The higher rates rise, the less demand we can expect to see as the costs of owning a house rise. However, confidence is getting a boost from the very limited supply of homes for sale. Unfortunately there isn’t much to look at in terms of supply. U.S. home prices surged 11.9% in June from June of 2012. In past quarters IT spending was made a priority through $450 million in capital expenditures, hopefully management offers guidance to the benefits of this spending.

Shares of the company are off the 52-week highs around $81 per share registered earlier in the year. In premarket trading shares rose to $77.50, roughly 4.5% off yet another 52-week high. As the street has some time to digest the quarter we will hopefully have more clarity on the success of some of the company’s new initiatives.

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