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Housing sector seems to be warming up after a rough winter

Home Depot (HD) shares have a spring in their step today. 

The world’s largest home improvement company saw sales grow in the second quarter. Global same-store sales rose 5.8% as customers dished out money for home repairs after the harsh winter. U.S. same-store sales rose 6.4%. The company also raised its full-year earnings outlook.

"In the second quarter, our spring seasonal business rebounded, and we saw strong performance in the core of the store and across all of our geographies," chairman and CEO Frank Blake said in a statement.

Yahoo Finance Senior Columnist Michael Santoli said this is a great quarter for Home Depot. The company is executing extremely well.

“Home Depot continues to really have extraordinary earnings growth, mostly because they keep buying back so much of their own stock. This is kind of a financial management story on the balance sheet for Home Depot, as well as a pretty good story for how they’re operating in the stores,” Santoli said.

Home Depot and Lowe’s (LOW) also likely benefited from recent strength in the housing market.

The overall housing market looks like it is back on track after getting hit hard in the second half of last year. The Commerce Department reported groundbreaking on new homes soared 15.7% in July to a seasonally-adjusted annual rate of 1.09 million units. That snapped two consecutive months of declines. Builders also plan to keep the strong pace going. Applications for building permits rose 8.1% from a month earlier to 1.052 million units.

A separate report on Monday from the National Association of Home Builders said U.S. homebuilder confidence rose to its highest level in seven months in August, thanks to an improving job market and mortgage rates that are still near historic lows.

Although retail sales overall stalled last month, one category that saw an uptick was sales of building materials, and garden equipment and supplies which grew 0.2% in July from the previous month. 

“One of the lessons we’re getting out of the general trend in retail is people are willing to spend on things that have some kind of durable value, whether it’s devices, electronics or of course things for your home. Not so much on things like clothes, or things like consumables that you can easily buy through Amazon (AMZN),” according to Santoli.

Lowe’s (LOW), which is scheduled to report earnings tomorrow, saw its shares rise on the heels of Home Depot’s better-than-expected results. Santoli said it seems investors expect Lowe’s also to benefit from the same seasonal effects as Home Depot.

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