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Home Depot sales beat on recovery in housing market

Home Depot, the No. 1 U.S. home improvement chain, reported better-than-expected quarterly sales as demand rose amid an improvement in the housing market.

Shares of the company rose 2.6 percent in premarket trading Tuesday.

Home Depot has benefited from rising home prices, combined with job, wage and credit growth that has prompted consumers to spend more on improving their homes.

The earnings report is no doubt a reflection of a stronger domestic market, but Home Depot also executed well during a season in which temperatures remained persistently warm before shifting suddenly to snowy, wintery weather, said Brian Nagel, senior equity research analyst at Oppenheimer & Co.

"The key with Home Depot is that they kept warm weather product in the stores longer, and then as the weather shifted, they got the snow shovels, ice melt, generators, whatever else in their stores quickly, so they were really able to take advantage of what was for a while an odd weather environment," he said during an interview on CNBC's "Squawk Box" on Tuesday.

Sales at established stores in the United States rose 8.9 percent in the fourth quarter ended Jan. 31. Analysts on average had expected sales to rise 5.3 percent, according to research firm Consensus Metrix.

Net earnings rose in the quarter to $1.47 billion, or $1.17 per share, from $1.38 billion, or $1.05 per share, a year earlier.

Net sales rose to $20.98 billion. Analysts on average had expected sales of $20.39 billion and adjusted earnings of $1.10 a share, according to Thomson Reuters I/B/E/S.

Shares of the home improvement retailer have plunged over 7 percent in 2016. The stock is also among the greatest weights on the Dow Jones industrial average year to date.

Nonetheless, Home Depot's stock is up nearly 9 percent in the last 12 months, handily outperforming shares of rival retailer Lowe's.

Home Depot (blue) vs. Lowe's (green) in last yearSource:FactSet

CORRECTION: This story has been updated to show that analysts expected the company to report adjusted earnings per share of $1.10 on revenue of $20.39 billion.

CNBC's Tom DiChristopher and Fred Imbert contributed to this report.