The Home Depot And The Housing Market HD, LOW
The Commerce Department today announced that single family home sales rose 4.9% in April, more than almost anyone expected. Home Depot's stock has been beaten like a red-headed mule for the last two months, falling from over $43 to under $38, in large part because of concerns about the health of the real estate markets.
Wall Street viewed sales and earnings for the fiscal quarter, ending April 30, as being less than up to par. But revenue did rise 13% to $21.4 billion. Even more impressive was that operating income rose 21% to $2.4 billion. But, weighted average weekly sales per operating store dropped 3%, and investors headed for the exits. The situation was not helped by the fact that, according to Reuter's, Home Depot's CEO said he was "disappointed with sales". The company also decided to no longer disclose "same store" sales and this was greeted with a chorus of criticism.
All of the would seem to be a great deal of bad news, but behind much of the drop in The Home Depot stock is the supposition that housing sales and starts are slowing down as mortgage rates rise. Lowe's (LOW) stock has suffered from the same malaise. Today's news from the government eases some of that concern. Not a trend yet, but at least a start.
The Home Depot's stock is now within hailing distance of its 52-week low. With sales and operating income continuing to show a strong pulse and the housing market not yet dead and buried, perhaps investors need to take another look.
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.
Wall Street viewed sales and earnings for the fiscal quarter, ending April 30, as being less than up to par. But revenue did rise 13% to $21.4 billion. Even more impressive was that operating income rose 21% to $2.4 billion. But, weighted average weekly sales per operating store dropped 3%, and investors headed for the exits. The situation was not helped by the fact that, according to Reuter's, Home Depot's CEO said he was "disappointed with sales". The company also decided to no longer disclose "same store" sales and this was greeted with a chorus of criticism.
All of the would seem to be a great deal of bad news, but behind much of the drop in The Home Depot stock is the supposition that housing sales and starts are slowing down as mortgage rates rise. Lowe's (LOW) stock has suffered from the same malaise. Today's news from the government eases some of that concern. Not a trend yet, but at least a start.
The Home Depot's stock is now within hailing distance of its 52-week low. With sales and operating income continuing to show a strong pulse and the housing market not yet dead and buried, perhaps investors need to take another look.
Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.
posted by douglas mcintyre at 3:29 PM
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