The housing market boom is expected to continue for the foreseeable future particularly as the Federal Reserve recently reaffirmed its plans to hold interest rates at the current levels for the time being. With businesses rapidly adopting hybrid business models, even as signs that the COVID-19 pandemic is starting to abate, demand for suburban houses is on the rise. In tandem with the housing industry, the home improvement industry continues to ascend.
According to the Leading Indicator of Remodeling Activity (LIRA), the home renovation and repair expenditure is expected to grow 3.8% to reach $352 billion by the end of 2021.
To exploit this trend, many home improvement companies are strengthening their online presence by launching online visualizer apps, brief instructions in do-it-yourself services, and safe and efficient door-to-door services.
Consequently, we expect home improvement stocks such as The Home Depot, Inc. (HD), Lumber Liquidators Holdings, Inc. (LL) and Haverty Furniture Companies, Inc. (HVT) to generate handsome returns in the coming months.
Click here to checkout our Retail Industry Report for 2021
The Home Depot, Inc. (HD)
Based in Atlanta, Georgia HD operates is a home improvement retailer that sells various building materials, home improvement products, decor products and lawn and garden products, and provides installation, tool and equipment rental and home maintenance services. The company targets mainly two primary customer groups — do-it-yourself (DIY) customers and Professional Customers. Along with scores of l operating retail brick and mortar stores, HD also sells its products online.
This month, the company launched a new suite of cordless outdoor power equipment aimed at both its customer segments. The equipment is easy to use and provides the environmental benefits of being battery powered, with power and run time of gas equipment. Also, HD’s Board of Directors declared a quarterly dividend of $1.65 per share payable on March 25, 2021.
HD has partnered Allstate on February 1 to create an industry-leading extended protection plan to provide customers expanded benefits and faster repair service. In December, it completed its acquisition of HD Supply, a leading national distributor of maintenance, repair and operations (MRO) products in the multifamily and hospitality end markets.
For its fiscal 2020 fourth quarter (ended January 31, 2021), HD’s net sales have increased 25.1% year-over-year to $32.26 billion. Its gross profit has increased 24% year-over-year to $10.83 billion. The company’s operating income was $4.08 billion, which represents a 20% rise year-over-year. Its net earnings of $2.86 billion for the fourth quarter represents a 15.2% rise year-over-year. Also, the company’s diluted EPS increased 16.2% year-over-year to $2.65.
Analysts expect HD’s EPS to improve 41.8% year-over-year for the current quarter, ending April 30, 2021, to $2.95. HD surpassed the Street’s EPS estimates in three of the trailing four quarters. Moreover, its consensus revenue estimate of $33.84 billion for the current quarter represents a 22.9% rise on a year-over-year basis. The stock has gained 79.4% over the past year and closed Friday’s trading session at $289.10.
HD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Momentum and a B grade for Sentiment and Quality. We have also graded HD for Growth, Stability, and Value. Click here to access all HD’s ratings.
HD is ranked #31 of 64 stocks in the A-rated Home Improvement & Goods industry.
Lumber Liquidators Holdings, Inc. (LL)
Founded in 1994, LL is a multi-channel specialty retailer of hardwood flooring and hardwood flooring enhancements and accessories. The company offers hardwood species, engineered hardwood, laminate and resilient vinyl flooring directly. LL serves primarily homeowners or contractors on behalf of homeowners. It offers its products through its website, catalogs and call center.
In January, LL announced Gold Coast Acacia Hardwood Flooring as the winner of the Floor of the Year contest, as determined by an online public vote last December on 12 top-trending floor styles. The company also launched a full suite of digital tools in January to help homeowners select floors, such as its online visualizer tool, Picture It. LL also offers a virtual store shopping experience for customers to meet with a live, in-store company associate via a computer or tablet.
LL’s total net sales were $304.21 million for the fourth quarter ended December 31, which represents an improvement of 11.1% year-over-year. While its non-GAAP gross profit was $115.78 million for the fourth quarter, up more than 3% from the prior year period, its non-GAAP net income was $31.38 million, up more than 91% year-over-year. Moreover, LL’s non-GAAP EPS increased nearly 86% year-over-year to $1.06.
A consensus EPS estimate of $0.25 for the next quarter, ending June 30, 2021, represents a 150% rise year-over-year. LL surpassed the consensus EPS estimates in three of the trailing four quarters. Also, its consensus revenue estimate of $299.40 million for the next quarter, ending June 30, 2021, represents a 35.6% rise from the prior year period. The stock has rallied 498.6% over the past year to close Friday’s trading session at $25.26.
LL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has an A grade for Value and Momentum and a B grade for Quality. In addition to the POWR Ratings grades I’ve just highlighted, one can see LL’s ratings for Growth, Stability and Sentiment here.
LL is ranked #17 in the same industry.
Haverty Furniture Companies, Inc. (HVT)
Operating as a retailer of residential furniture and accessories, HVT sells home furnishings through its retail stores and through its website — havertys.com. The company provides custom upholstery products and eclectic looks, and mattress product lines under the brand names: Skye, Sealy, Tempur-Pedic and Serta. It also offers financing through a third-party finance company and an internal revolving charge credit plan.
HVT’s Board of Directors declared a cash dividend payable on March 25, 2021 on the company’s outstanding shares at . at a rate of $0.22 per share on the common stock and $0.20 per share on the Class A common stock. Also, the company announced several key leadership promotions on February 23, including the promotion of Steve Burdette to company president, effective March 1. He was previously executive vice president, operations.
The company’s net sales increased nearly 13% year-over-year to $241.34 million for the fourth quarter ended December 31, 2020. HVT’s gross profit was $137.62 million, which represents a 18.8% improvement year-over-year. Its net income has increased 316.9% year-over-year to $25.43 million for the quarter. Moreover, its adjusted EPS has increased 242.5% year-over-year to $1.37.
Analysts expect HVT’s EPS for the current quarter, ending March 31, 2021 to be $0.41, up 355.6% year-over-year. It’s earnings surprise history looks impressive, with the company missing the consensus EPS estimate in just one of the trailing four quarters. For the next quarter, ending June 30, 2021, analysts expect HVT’s revenue to come in at $197.51 million, representing a 79.6% rise from the prior year period.
The stock has gained 219.1% over the past year to close Friday’s trading session at $39.41. It is currently trading just 2.4% below its 52-week high of $40.38.
It’s no surprise that HVT has an overall A rating, which equates to Strong Buy in our POWR Ratings system.
Also, the stock has an A grade for Growth, Value, Momentum and Quality. Click here to see the additional POWR Ratings for HVT (Stability and Sentiment).
HVT is ranked #1 in the same industry.
Click here to checkout our Retail Industry Report for 2021
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HD shares were unchanged in after-hours trading Monday. Year-to-date, HD has gained 9.46%, versus a 5.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
More Resources for the Stocks in this Article
| Ticker | POWR Rating | Industry Rank | Rank in Industry |
| HD | Get Rating | Get Rating | Get Rating |
| LL | Get Rating | Get Rating | Get Rating |
| HVT | Get Rating | Get Rating | Get Rating |
