Home Depot 4Q results top Street, OKs $17B buyback

NEW YORK (AP) -- Home Depot Inc., the largest U.S. home improvement retailer, said Tuesday its fiscal fourth-quarter net income surged 32 percent, beating expectations, helped by strong U.S. sales and the cleanup related to Superstorm Sandy.

The news follows smaller rival Lowe's Cos. results Monday, which also beat expectations, and is the latest sign that Americans are feeling more comfortable spending money on their homes as the housing market slowly recovers.

"We ended the year with a strong performance as our business benefited from a continued recovery in the housing market coupled with sales related to repairs in the areas impacted by Hurricane Sandy," Home Depot CEO Frank Blake said in a statement.

The company said its results were strong across the country. New York and New Jersey were the strongest regions as people repaired homes after Superstorm Sandy, but there was also recovery in Florida, California and Arizona — the hardest hit regions during the housing downturn.

Home Depot also said Tuesday that it will buy back $17 billion of its common stock and boosted its quarterly dividend by 34 percent.

Its shares rose more than 5 percent in midday trading.

The news comes amid other signs that the economy is finding its way again. The Standard & Poor's/Case-Shiller 20-city home price index rose 6.8 percent in December, up from a 5.5 percent annual gain in November. And consumer confidence rose more than expected in February, according to the New York-based Conference Board, reversing three months of decline.

For the period ended Feb. 3, Home Depot Inc. earned $1.02 billion, or 68 cents per share. That compares with $774 million, or 50 cents per share, a year ago. Analysts polled by FactSet expected 64 cents per share.

The chain said that an extra week in the current quarter compared with last year increased its earnings by about 7 cents per share.

Revenue climbed 14 percent to $18.25 billion from $16.01 billion, beating Wall Street's estimate of $17.72 billion.

The extra week added approximately $1.2 billion to the current quarter's revenue. Home Depot estimates Superstorm Sandy added $242 million in sales during the quarter, $112 million more than sales related to Irene in the prior year.

Revenue at stores open at least a year, a key indicator of a retailer's health, increased 7 percent. In the U.S., the figure climbed 7.1 percent. The extra week is not included in these results.

This metric excludes results from stores recently opened or closed.

Purchases under $50 rose 0.3 percent in the fourth quarter, while purchases over $900 rose 9 percent, boosted by sales of generators and appliances.

CEO Blake said there are many encouraging signs the housing market is finally on the mend. During the downturn and the recent stabilization, sales to professional renovators lagged behind consumer sales. But in the fourth quarter, both grew at the same pace. Also, sales to smaller pros are growing along with larger-ticket professionals.

"We had a hypothesis that growth would start to reach our smaller volume pros as the market recovered, and our fourth quarter results provide at least one data point to suggest that is occurring," Blake said.

Its full-year net income rose 17 percent to $4.54 billion, or $3 per share, from $3.88 billion, or $2.47 per share, in the previous year. Annual revenue increased 6 percent to $74.75 billion from $70.4 billion.

Revenue at stores open at least a year rose 4.6 percent, with U.S. results up 4.9 percent.

For fiscal 2013, the Atlanta company anticipates earnings of $3.37 per share adjusted for share repurchases. Revenue is expected to climb about 2 percent. Based on 2012's revenue, this implies $76.21 billion.

Wall Street expects earnings of $3.50 per share on revenue of $76.24 billion.

Even though the guidance is below analysts' expectations, NBG Productions analyst Brian Sozzi said the company is typically cautious on its outlook.

"The guidance is about right for the usually conservative Home Depot team," Sozzi said in a client note.

CFO Carol Tome says the guidance does not assume that the housing market will fully recover in 2013. "Some may say that this is a conservative view — we would agree," she said. "But we would rather plan conservatively, and, as we showed in the fourth quarter, if sales are stronger than we expect we can react quickly to the demand."

CEO Blake added that he expects a "workout" stage in the housing market for two years before the housing market hits "really the recovery stage."

Home Depot said that its $17 billion buyback replaces a prior authorization. The company has repurchased about 1 billion shares through Feb. 3. It plans to complete $17 billion in buybacks by the end of fiscal 2015.

The 34 percent increase to Home Depot's quarterly dividend puts it at 39 cents per share. The dividend will be paid on March 28 to shareholders of record on March 14.

Home Depot had 2,256 retail stores in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico at the end of the fourth quarter.

Shares rose $3.64, or 5.7 percent, to close at $67.56 Tuesday, near the high end of its 52-week range of $46.12 to $68.15.