Home Depot Inc (NYSE:HD) is among a small group of companies that stand to benefit greatly from a combination of low home inventories and historically high home prices, which is spurring a surge of home renovation projects.
The Wall Street Journal has details on the development, which promises to be a major boon for HD and its chief rival, Lowe’s:
Americans are expected to pour a record $316 billion into home remodeling this year, up from $296 billion a year earlier, according to Harvard University’s Joint Center for Housing Studies.
The burst of renovations has been a boon for contractors as well as big home-improvement companies, which have enjoyed strong revenue growth even as most other retailers are struggling.
It also reflects rising home prices and growing consumer confidence, as people are once again willing to invest in their homes, either through savings or by tapping home equity.
The renovation boom is likely to lead to record profits for both Home Depot and Lowe’s. Wall Street analysts expect Lowe’s 2017 EPS to grow to $4.62 this year, up from $3.99 in 2016. Meanwhile, Home Depot is seen reporting EPS of $7.24 in 2017, compared with $6.45 last year.
To put the home inventory problem into perspective, according to Zillow, there are around the same amount of homes for sale right now than in 1994. The only problem is, there are 63 million more people in the United States now.
Home Depot Inc shares were trading at $147.26 per share on Tuesday afternoon, up $2.68 (+1.85%). Year-to-date, HD has gained 11.14%, versus a 11.82% rise in the benchmark S&P 500 index during the same period.
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