Home Depot, Inc. (NYSE:HD) reported third-quarter results on Nov. 17 and continued its three-quarter run of raising full-year 2015 guidance. Moreover, management discussed the positive trends in its underlying business and outlined how the key drivers of its growth continued to show positive signs. It's time to take a closer look at a good quarter for the retailer.

Home Depot third quarter: The raw numbers
Reported sales increased 6.4% compared to the third quarter of 2014 and diluted EPS came in at $1.35, a 17.4% increase from last year. Comparable-store sales growth was 5.1% and U.S. comparable-store sales growth was 7.3%.

Sales grew, and so did margin. Compared to the same quarter last year, cost of sales increased 5.8% -- less than the net sales increase, which meant that gross profit was ahead by 7.4%. Further down the income statement, selling, general, and administrative expenses only increased 2% leading to an impressive operating income increase of 16.8%

Free cash flow (operating cash flow minus capital expenditures) came in at $6.28 billion, an increase of 19.7% from the third quarter last year, representing nearly 29% of sales in the quarter. Moreover, there were some impressive increases in operational statistics.

  • Number of customer transactions increased 4.4%.
  • Average ticket increased 0.8% to $58.03.
  • Sales per sq. ft. increased 5.3% to $366.37.
  • Online sales grew 25% in the quarter and now represent 5.1% of total sales.

And finally, full-year guidance was raised:

  • Full-year guidance for sales growth of 5.7% compared to a previous range of 5.2% to 6%
  • Full-year same-store sales growth for 4.9% compared to a previous range of 4.1% to 4.9%

Finer detail
To put the sales and sales guidance into context, here are two charts. As you can see, you have to go back to the third quarter of 2011 to see where total growth outpaced U.S. growth.

Data source: Home Depot presentations. Figures represent growth.

In addition, the guidance hike is the third consecutive one for Home Depot.

Data source: Home Depot presentations. The last four figures represent the mid-point of guidance.

Three things management said
The earnings call also contained useful information, for example Executive VP of Merchandising Ted Decker said, "Pro heavy categories continue to show great strength and we saw double-digit comps and power tools, commercial lighting, HVAC, fencing and power tool accessories." Analysts like to look at professional categories because they tend to be higher-ticket and more cyclical.

Second, CFO Carol Tohme indicated that the quarter was pretty consistent in terms of growth. "In the U.S. if you assume Labor Day fell in the same fiscal month as last year our comps were 6.9% in August, 7.8% in September and 7.1% in October."

Third, CEO Graig Menear outlined what makes the business tick: "Turning to the macro environment, while 2015 consensus U.S. GDP growth projections have moderated we continue to see positive signs in the housing data with home price appreciation and housing turnover being key drivers of growth for our business."

Looking ahead
All told, it was a good report with guidance increased again and good earnings and cash flow generation. Menear signaled house prices and housing turnover as the keys to its growth. Investors should therefore keep an eye on both in the future. As long as the housing market is in good shape, so Home Depot will be, too.