Home Depot (HD 1.01%) reported fiscal first-quarter results on Tuesday, and it's clear 2021 is off to a great start. The home improvement-focused retail giant reported better-than-expected revenue and earnings but stayed short of predicting that the rest of the year will follow this trend. 

The latest round of stimulus checks hit bank accounts in the U.S. in March, which fueled a surge in sales for Home Depot. Folks continue to spend on their homes even as pandemic restrictions ease in many states. It was a surprising development after many analysts (including yours truly) thought that pent-up demand for activities outside the home would attract a larger share of spending than is actually playing out. 

A Home Depot associate stocking shelves.

Home Depot beat analyst revenue and earnings-per-share expectations in the first quarter. Image source: Home Depot.

Revenue growth at Home Depot continues to defy expectations 

In the first quarter, revenue increased by 32.7% year over year at Home Depot compared to last year. The level of the surge in sales was somewhat surprising considering that states were starting to ease pandemic-related restrictions, giving consumers more options for where they could spend their money.

Analysts on Wall Street estimated that Home Depot would report revenue growth of just 24.1% in the first quarter, citing the easing business restrictions and home-improvement fatigue after a year of projects as causes. That was clearly not the case. 

What's more, so far in the first two weeks of May, sales are trending 30% above pre-pandemic levels. That figure highlights a slowdown in revenue growth from the first quarter, but nowhere near a return to the levels from before the onset of the pandemic.

Rapidly rising revenue caused earnings per share to increase faster than expected. Analysts were expecting EPS of $2.98. Instead, Home Depot reported EPS of $3.86 -- an increase of 85% from last year and 30% above analyst estimates.

What this could mean for investors 

Home Depot's first-quarter results give insight into how consumer shopping behavior will evolve as the fear of contracting COVID-19 diminishes. Rather than quickly reverting to pre-pandemic norms, it appears consumers are being cautious. That could be a good sign for Home Depot shareholders, as the home-improvement retailer may benefit from a few more quarters of elevated demand. 

Home Depot's stock price fell by 1% on the day after an initial positive reaction to the earnings announcement. Admittedly, the boosted growth rate is not sustainable over the long run. Over the last decade, Home Depot has increased revenue at a compounded annual rate of 6.9%, which is a more realistic figure for investors to expect over the next decade. Still, even at that lower growth rate, Home Depot has increased earnings per share at a compounded annual growth rate of 19.5% over the same period.

Investors who are looking for a stock they can buy and hold for the long term can feel confident that holding Home Depot is likely to increase their wealth over time.