"If you look back at related data — the index of builder's confidence and home improvement suppliers' positive comments — all that points to a strengthening demand over the last few months. I think this has legs, and it will persist for some time" added Nagel.
For Nagel, this is reason enough to buy both Home Depot and home improvement competitor Lowe's stock.
Analyst Christopher Horvers at JPMorgan is also bullish on both names, and expects a positive earnings surprise from Lowe's when it reports fourth-quarter earnings on Monday next week.
But Horvers doubts that Home Depot's earnings announcement is a bellwether for housing.
"You're really not getting a lot of housing helping you. It's the merchandising. Its the supply chain. And the consumer is feeling just a touch better," said Horvers in a separate interview Tuesday.
The market share of these companies alone is behind Horvers' "buy" rating.
"Home Depot is about 30 percent of the home improvement market, and Lowe's is about 20 percent," noted Horvers, explaining that this dominance means vendors have a tough time pushing price hikes onto their core retailers, and often absorb price increased themselves.
Horvers thus predicts Home Depot's stock will move higher.
"The spring is a bigger quarter than the fourth quarter. But it's a stock you want to own in the near and longer term," added Horvers.
Home Depot sees low-single-digit same-store sales growth for 2012. Its fiscal 2012 estimates are for $2.79 in earnings per share compared to analyst expectations of $2.77.
Additional News: Home Depot’s Earnings, Sales Rise Amid Mild Weather
Additional Views: Lowe's Could See Lift, Analyst Says
CNBC Data Pages:
Neither Brian Nagel nor Christopher Horvers own stock in HD or LOW but Morgan Stanley has an investment banking relationship with both companies. Oppenheimer does not have a relationship with either company.