Home Depot is on fire right now despite continued housing market concerns.
They raised their guidance and hiked their dividend in their latest earnings release, prompting analysts to increase their forecasts as well.
As Deborah Weinswig at Citi highlights, Home Depot is experiencing a demand rebound across all of its regions.
Deborah Weinswig @ Citi:
State of the Housing Market and Sales Performance
Regional Sales Performance. Out of HD’s top 40 markets in the U.S., all but two markets experienced SSS improvement in 4Q09. Every HD region experienced SSS improvement in the quarter YOY. The Northern division (HD’s largest division with eight regions), had positive SSS for the quarter. There was also sequential improvement in CA and FL, with a return to positive comps in some of these markets. The business performed very well in Canada in the quarter, with double-digit positive SSS driven by: (1) better performance by the business; (2) recovery from the underperformance LY due to the new IT systems; (3) improving economic conditions; and (4) a government stimulus program designed to support homeowners updating their houses. In Mexico, the business continued to achieve positive comps in the quarter and the year despite a very tough economic environment.
PFRI Improving but Below 60-Year Average. Private Fixed Residential Investment (PFRI) as a per cent of GDP has stopped its dramatic and historic decline, but still remains well below the 60-year average. Additionally, the housing industry remains at distressed levels, as mortgage defaults continue to increase, unemployment remains high, and the PRO customers are still under pressure. As a result, HD expects 2010 to be a transitional year.
It should be emphasised that things are still soft, which most people know, but what’s notable is that they are improving. When we listened to Home Depot’s conference call, the major concern was whether or not HD could catch a rebound properly after having scaled back during the crisis, rather than anything in regards to a new crisis. The company clearly sees housing market stabilisation from its ground-level view.
(Via Citi, Home Depot 4Q09 EPS Review, Deborah Weinswig, 23 Feb 2010)