Nothing like an act of God to reverse a company’s fortune. The cleanup and rebuilding demanded by Hurrican/SuperStorm Sandy coupled with an improving housing market has left The Home Depot, Inc. (NYSE:HD) in great shape, albeit with considerably fewer generators remaining on its shelves.
Home Depot saw a 32% rise in fiscal-fourth quarter profits. While it joined its competitor Lowe’s and retailing behemoth Wal-Mart Stores, Inc. (NYSE:WMT) in a less than stellar forecast, but The Street has come to know Home Depot as terrifically conservative in their forecasts. The Dow member was rewarded with a stock that jumped 5.8% to $67.62, its biggest percentage gain since May 2009.
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“While we believe a recovery in housing is underway, GDP growth is expected to be modest, and there are a number of pressures on our customers, including reduced disposable income and continued constraints on credit availability,” Home Depot Chief Executive Frank Blake said during a conference call. He further went on to say, “We continue to believe that the path to recovery will resemble a gradual thawing process.”
Most analysts believe that Home Depot is basing its projections on a GDP growth of 2% this year. A “prudent” number according to JPMorgan Chase & Co. (NYSE:JPM) analyst Christopher Horvers who also said, “The HD story remains on track with fourth-quarter results demonstrating the power of the model and potential of the business in a more buoyant housing environment.”
The aforementioned stock buyback includes and already authorized $17 billion to, as Patrick Stewart might say, “Make it so.”
The Home Depot, Inc. (NYSE:HD)’s dividend of $0.39 per share represents a rise of 34% over last year’s payout.
“Our results benefited from storm repair, but they also reflected an improving housing market,” CEO Blake said on the call. He is certainly referring to improving housing trends in Arizona, California, and Florida, the three are/were among those hit hardest during the housing bubble collapse.
Additional good news for Home Depot investors revolves around the success of the company’s “buy-online-for-store-pickup service” and expanded offerings of home appliances in an effort to take a bite out of Sears’ sales.
Lastly, reports of sales in both Mexico and Canada have been encouraging both to Home Depot and its investors. Canadian business posted a fifth straight comparable-store-sales rise, at the same time its Mexican business posted positive same-store sales for a 37th consecutive year.
Despite an uncertain housing market, it’s tough to disregard The Home Depot, Inc. (NYSE:HD)’s positive guidance.