Home Depot (HD 3.50%) provided mixed results with its fourth-quarter earnings and forward guidance today, but the stock is in rally mode. The results brought somewhat of a relief rally after shares of the leading home improvement company declined by almost 8% in the past month.
Home Depot stock moved higher by 3.5% this morning as of 11:25 a.m. ET. Beyond a bounce off the recent decline, there are good business reasons why investors are seeing the quarterly report as a net positive today.
The report was good news on the surface. Comparable sales increased 0.8% across the company in the fourth quarter. That was well ahead of an expected 1.5% drop, and the increase broke a streak of eight consecutive quarterly declines.
The company also slightly beat analyst expectations for revenue and earnings per share and announced a 2.2% increase in its quarterly dividend. Yet there was some disappointment in what management said about 2025.
The company only predicts 1% same-store sales growth this year, while analysts hoped for a 1.7% increase. But investors put a positive spin on that guidance for good reason.
Home Depot management acknowledged the tough housing market in which it is currently operating. CEO Ted Decker stated, "We remained steadfast in our investments across our strategic initiatives to position ourselves for continued success, despite uncertain macroeconomic conditions and a higher-interest rate environment that impacted home improvement demand."
In an interview with CNBC, Home Depot CFO Richard McPhail said the housing market is "still frozen" by high mortgage rates. He also acknowledged that borrowing costs may not fall at all this year. That may continue to hamper new home sales as well as renovation projects.
Yet the company still sees sales growing this year. That's partly due to its investments in technology, as well as a focus on gaining market share with professional clients.
Growing through a tough housing market is a sign of good management and a strong company. That helps explain today's stock move higher.
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