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Home Depot Rises on Earnings Optimism

By Dan Carroll – Feb 25, 2014 at 2:30PM

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Chevron also rises over speculation regarding its midstream business, while Boeing falls.

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Stocks are taking a breather after yesterday's big run-up, with the Dow Jones Industrial Average (^DJI 0.45%) just below breakeven as of 2:30 p.m. EST. While the index's blue-chip stocks are split pretty evenly between risers and losers on a day of relative calm for investors, Home Depot (HD 1.51%) is lighting up the markets with a huge rise. Boeing (BA 2.01%), though, has sunk 2.1% to fall to the bottom of the Dow. Let's catch up on what you need to know.

Home Depot hits the right marks
Earnings season is mostly finished, but Home Depot's late report is delighting investors and bringing in a 3% gain on the market. The home improvement retailer announced today that net earnings fell 1% for its most recent quarter and total sales dipped 3%, consequences of the winter's unusually bad weather. The housing market's rise has sustained Home Depot's climb over the recent past, and while the company's performance dropped off a bit in this most recent quarter, it still managed to beat analyst estimates.

Can the retailer keep up its stock's huge gains after rising more than 65% over the past two years? Projections certainly look rosy: Home Depot expects same-store sales growth of 4.6% for the coming fiscal year, ahead of the 4.4% mark it notched in the fourth quarter. U.S. same-store sales growth in particular has been on a tear lately, picking up 4.9% for the quarter; however, some housing industry observers believe that home price increases and the likelihood of rising interest rates could hamper the sector's growth this year. Still, even though home prices gained more than 13% year over year in December, prices still are far below their pre-recession peaks. With the economy still in rebound mode, there's plenty of room for optimism for Home Depot investors.

Meanwhile, 2013 top Dow stock Boeing has struggled today. Shares of the aerospace giant have tumbled after reports emerged that Boeing is having trouble finding a buyer for 11 787 Dreamliner aircraft the company built early on that had to be retrofitted to meet safety standards, according to a report from Bloomberg Businessweek. The aircraft are valued at up to $1.1 billion; while that may seem like a lot for most companies, it's only a drop in the bucket for Boeing. The airplane manufacturer's total commercial backlog stands at nearly $373 billion as of its most recent fiscal year's end and has been growing rapidly lately. Don't stress Boeing's latest hiccup too much, shareholders.

Finally, Chevron's (CVX -0.29%) stock has gained about 0.8% today amid reports that the company is potentially interested in finding a buyer for its midstream business. Chevron has launched a strategic review of the unit, according to sources who spoke to Bloomberg, although the company hasn't committed to a sale or any other permanent option for the business just yet. Analysts estimate the midstream division could be worth up to $5 billion, a price that would be a big injection of cash for Chevron. Still, things are only in the early stages as far as Chevron and its midstream business go: Don't expect a decision on this unit for quite some time.

Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Chevron and Home Depot. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$34,347.03 (0.45%) $152.97
Boeing Stock Quote
$178.36 (2.01%) $3.51
Chevron Stock Quote
$183.70 (-0.29%) $0.54
Home Depot Stock Quote
Home Depot
$326.38 (1.51%) $4.87

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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