Recovery in US housing market drives Home Depot sales beat

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Home Depot, the world's No. 1 home improvement retailer, reported on Tuesday a better-than-expected rise in quarterly same-store sales, helped by a recovery in the U.S. housing market.

The key metric in the report is the 5.7 percent positive domestic sales comparison to the same period last year, said Oppenheimer & Co. senior research analyst Brian Nagel.

"There was very much a view that sales could be soft here, and what we're seeing in these numbers is that they're actually quite good," he told CNBC's "Squawk Box."

The company's overall same-store sales rose 4.2 percent in the second quarter, beating the average analyst estimate of 3.5 percent growth, according to research firm Consensus Metrix.

Home Depot can grow even further by meeting the needs of contractors, Nagel said. "There's a real opportunity for them to better penetrate that pro customer. Behind these results, I think we're starting to see some success of that already."

Home Depot shares edged lower in premarket trading immediately following the report. (Get the latest quote here.)

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Nagel said the movement may be a knee-jerk reaction among investors to in-line earnings for a stock that hit a fresh high on Monday.

"I wouldn't read too much into this early movement in the stock. I think as investors digest this report, they're going to come away with the view that, look, this is another very solid announcement from a very solid company that's well-positioned," he said.

The home improvement retailer posted second-quarter earnings excluding items of $1.71 per share, up from $1.52 a share in the year-earlier period.

Revenue rose to $24.83 billion from $23.81 billion a year ago.

The company also raised its full-year outlook to a range of $5.31 to $5.36 a share.

Analysts expected Home Depot to post quarterly earnings per share of $1.71 on revenue of $24.69 billion, according to a Thomson Reuters consensus estimate.

Shares of Home Depot have outperformed rival home improvement retailer Lowe's this year, rising nearly 15 percent while Lowe's stock is up about 5 percent.

Home Depot same-store sales were forecast to rise 3.5 percent, according to Consensus Metrix.

—Reuters contributed too this story.

DISCLOSURE: Neither the analyst nor his family own shares of Home Depot. Oppenheimer & Co. does not own greater than a 1 percent share in the stock, and does not provide investment banking services to Home Depot.