Home Depot made headlines everywhere Tuesday morning after announcing an astounding 32% growth in 4th quarter earnings for 2011. They also claim that they expect to see continued growth in 2012 with signs of an increasing home-improvement market. Some of the recent sales and customer traffic gains may be attributed to the unusually warm winter months being experienced. However, Florida stores outperformed the company average, and California locations were on cue with the average, which shows promise considering both of these states were hit hard by the housing crisis². Taking into account these factors, could this mean that we have reached a housing bottom?
While there is still obvious uncertainty about the future of the housing market, the fact that the housing sector is not getting worse suggests large upside and has come to the surprise of some analysts¹. Early Tuesday, shares of Home Depot reached their highest levels in 9 years and analysts contribute this to an overall positive sentiment in the community for the housing recovery². Henry Blodget, CEO of Business Insider and co-host of The Daily Ticker, stated “at least we’re back to average” when it comes to prices of homes relative to what people are earning and the cost to rent¹. On the subject of stock appreciation and the current optimistic economic outlook, Blodget states that this may simply be “expectations catching up with reality².”
The current spike in shares for Home Depot and their impressive 4th quarter earnings certainly suggest that we are on the verge of recovery. The question remains whether we have indeed reached a housing bottom, or is this one more sign that increases optimism only to disappoint in the end? The picture is still not clear, but ideally we can hope that the bottom has been reached for both housing and the US economy as a whole.
Other home-improvement companies to watch:
Pier 1 Imports (PIR), Lowe’s (LOW), Orchard Supply Hardware Stores (OSH)
1 Macke, Jeff. “Home Depot Earnings Surprise: Sign of a Housing Bottom?” Yahoo! Finance. 21 Feb. 2012. Web. 21 Feb. 2012..
2 Solsman, Joan E. “THE HOME DEPOT, INC.” Home Depot 4Q Net Up 32% On Strong Sales. 21 Feb. 2012. Web. 21 Feb. 2012..