Home Depot, Lowe´s and Lumber Liquidators Continue Building Profitshttp://www.fool.com/investing/general/2013/11/20/home-depot-lowe-s-and-lumber-liquidators-continue.aspx Andrés Cardenal
November 20, 2013
Home improvement retailers like Home Depot (NYSE: HD), Lowe´s (NYSE: LOW) and Lumber Liquidators (NYSE: LL) are reaping the benefits from the estate recovery and reporting rock-solid financial performance for investors. Even if valuations are getting stretched, these companies are firing on all cylinders and their recent highs might be justified.
Home Depot: the heavyweight champion
Home Depot has been an unequivocal beneficiary from the real estate recovery over the last years, and management has implemented a series of initiatives to increase efficiency and streamline operations. Home Depot sold its professional supply business in 2007 and closed its ancillary retail operations in early 2009, the company pulled away from China in 2012 so management is now free to focus on its key orange box stores.
The company is doing remarkably well lately, and there is no slowdown in sight as of the last quarter. Home Depot reported sales of nearly $19.5 billion during the quarter, a 7.4% increase from the third quarter of 2012. Comparable store sales rose by a healthy 7.4% and the U.S. business was even stronger with an annual increase of 8.2% in comparables during the period.
On an adjusted basis, Home Depot reported a whopping increase of 28.4% in earnings per share versus the year-ago period. The outlook got stronger too, management raised guidance for the full year and it now expects a 24% increase in earnings per share for fiscal 2013 fueled by a 7% rise in comparable sales for the period.
Home Depot is trading at a current P/E ratio of 23.7, a demanding valuation for a retailer, but not too excessive if the company manages to sustain these kinds of growth rates in the coming years.
Lowe´s: the challenger
Another similarity between Lowe´s and Home Depot is that both companies continued performing strongly during the last quarter. Lowe´s delivered a 7.3% annual increase in sales on the back of a 6.2% rise in comparable store sales during the quarter. Earnings per diluted share jumped by 34.4% to $0.47 per share. This was a tad below analysts' expectations but still amounts to a very strong performance for such a big retailer.
Management also raised its forecast for the rest of the year, saying that revenues are expected to increase by 6% fueled by a 5% rise in comparable store sales, and earnings per share are forecasted to grow by 23.8% to $2.15 per share in fiscal 2013 versus $2.1 per share in fiscal 2012.
CEO Robert A. Niblock has an optimistic vision for the industry in the coming quarters: "The home improvement industry is poised for persisting growth in the fourth quarter and further acceleration in 2014". Niblock said in the press release.
Lowe´s trades at a P/E ratio near 25.5, in line with Home Depot and reflecting strong growth expectations for the company in the medium term.
Lumber Liquidators: the runner-up
This smaller size means that Lumber Liquidators doesn´t enjoy the same kind of scale as Home Depot or Lowe´s, but it also allows for superior