Home Depot sales soar, Housing starts plunge 30% in April

Home Depot's sales soared in the first quarter, despite an increase in costs due to the coronavirus. Housing Starts in the month of April also plunged more than 30 percent from the month of March. Yahoo Finance's Emily McCormick breaks down the details.

Video Transcript

BRIAN SOZZI: It's a big day for getting a read on the housing market. Home Depot is out with earnings, and housing starts have been released. Yahoo Finance's Emily McCormick is here to break down all the details. Emily.

EMILY MCCORMICK: Good morning, Brian. We did have a tough report on housing starts for the month of April. Those did fall more than expected, although this was an anticipated sign of weakness for home builders amid the coronavirus pandemic.

So taking a look at those numbers, we had housing starts down 30.2% in April over March to a seasonally adjusted annual rate of 891,000. That was the lowest level since February 2015 and a larger drop than had been anticipated. So consensus economists were looking for starts to drop by just 26% to 900,000, and we did see March's starts revised up to about 1.3 million, representing an 18% decline over the prior month.

Taking a look by region, we saw new privately owned housing starts fall the most in the Northeast with a 43.6% decline month on month. That was followed closely by the West with a 43.4% drop in housing starts, though we did see the Midwest and South also posting declines month on month.

And then finally, we want to take a look at those building permits because those were also down in April over March but at a slower pace than had been expected, and building permits are a closely watched proxy for future home building. So we saw permits down nearly 21% to a seasonally adjusted annual rate of 1.074 million. That was also the lowest level since early 2015, though a less drastic decline than the near 26% drop expected to a pace of 1 million for permits. But again, this was an extension of declines that we saw month on month from March, another signal here of that tough housing market.

Then taking a look at the results that we got from Home Depot-- which, of course, is closely levered to the housing market and just building supplies in general. We did a mixed report from them. Sales did beat expectations, but profit was lower than expected, and we do have the Street taking this report to the downside this morning with shares off just over 1% in early trading.

Looking at those numbers, we had quarterly comparable sales growth of 6.4% or better than the 4 and 1/2% growth expected. And this was driven by a rise in average ticket, but the number of customer transactions did drop during the quarter, so a similar phenomenon to what we saw with Walmart.

Then I want to point out that we saw earnings per share short of expectations by about $0.17 at $2.08 a share. And this came as Home Depot did incur a pretax expense of about $850 million to roll out coronavirus-related measures to support associates, including expanded benefits.

So again, a mixed report we saw here. They did withdraw their 2020 guidance as well, joining a number of other companies in doing so, and shares are trading to the downside. Brian and Alexis.

BRIAN SOZZI: Emily McCormick, thanks so much.