Home Depot Soars On Q4 EPS, Outlook And Big Dividend Hike

Home Depot on Tuesday reported accelerating growth and a strong 2013 outlook as fresh economic reports showed the housing market continues to improve.

Shares of the retail giant, which also announced a big buyback program and dividend hike, soared along with builders and other related companies.

The No. 1 U.S. home improvement chain's shares rose nearly 6% to 67.56 on the stock market Tuesday. They hit 68.15 on Jan. 28, nearly a 13-year high.

Growth Accelerates Home Depot (HD) said Q4 earnings jumped 36% to 68 cents, topping analyst estimates by 4 cents. Sales rose 14% to $18.2 billion, above expectations of $17.7 billion. That was the second straight quarter of faster EPS and sales growth, with the latter's advance the best in years.

Sales at stores open for at least a year jumped 7% from a year earlier. U.S. same-store sales climbed 7.1%. The average amount each customer spent per shopping trip rose 5.6% and Home Depot's online sales had a "strong" holiday season.

The company raised its quarterly dividend 34% to 39 cents per share, the fourth increase in four years. It also announced a $17 billion stock buyback program.

Home Depot sees 2013 EPS of $3.37, well above analyst estimates for $3.05.

The housing market's turnaround has helped boost earnings in recent quarters, but CEO Frank Blake expects "the path to recovery will resemble a gradual thawing" and not a huge bump in any one month.

CFO Carol Tome said, "While recovering, we do not believe the housing market will fully recover in 2013.

Housing data released on Tuesday pointed toward continued improvement. U.S. new-home sales jumped 16% in January to their highest level in more than four years, the Commerce Department said, well above forecasts. Home prices rose 6.8% in December vs. a year earlier in the 20 metro areas covered in the S&P Case-Shiller's composite index, the best since 2006.

PulteGroup (PHM) rose 6% and Lennar (LEN) nearly 4%. Both have retreated since hitting multiyear highs about one month ago.

Home Depot is part of the Retail/Wholesale Building Products group, ranked No. 65 out of the 197 industries that IBD follows.

Lowe's (LOW) shares climbed 2% Tuesday. Home Depot's smaller rival fell 5% Monday as its weak 2013 outlook offset better-than-expected Q4 earnings.

Home Depot lost 2.5% Monday on Lowe's outlook and the general market sell-off.

Lumber Liquidators (LL), which hit a new high early Feb. 20 on strong earnings, has reversed sharply since then. But the stock rose 5.5% Tuesday, back above its 50-day moving average.