NEW YORK -- Home Depot, the largest U.S. home-improvement retailer, posted a first-quarter profit that trailed some analysts' estimates after a long winter slowed the rebound in the housing market.
Net income in the three months through May 4 rose 12 percent to $1.38 billion, or $1 a share, from $1.23 billion, or 83 cents, a year earlier, the Atlanta-based company said Tuesday in a statement. Excluding some items, profit was 96 cents a share. The average of 25 analysts' estimates compiled by Bloomberg was 99 cents, with some projections as high as $1.01.
Abnormally harsh weather in some parts of the country and higher mortgage rates slowed the housing expansion that had helped Home Depot more than double its profit in the past four years. Sales of previously owned homes fell to the slowest pace in 20 months in March.
"Weather was an obvious factor, but there's also been this lagging impact on home-related retail because we've had less turnover in home sales since mortgage rates went up," said David Schick, an analyst at Stifel Financial Corp. He has a hold rating on Home Depot shares.
Home Depot's first-quarter revenue rose 2.9 percent to $19.7 billion, trailing analysts' average estimate of about $20 billion. Same-store sales, considered an important measure of performance because only established stores are counted, rose 2.6 percent. Analysts projected a 5 percent gain.
The shares rose $1.46, or 1.9 percent, to close Tuesday at $77.96. Home Depot was little changed in the 12 months through Monday, compared with a 6.7 percent advance for Lowe's Cos. and a 13 percent increase for the Standard & Poor's 500 Index.
Home Depot's profit had met or exceeded analysts' estimates every quarter since early 2008, beating expectations 23 times and matching them once.
Profit this year will be $4.42 a share, Home Depot said Tuesday. That's up from a previous forecast of $4.38 and tops analysts' $4.41 average estimate.
The U.S. housing market has been showing signs of slowing in recent months. Along with the previously owned home sales drop, purchases of new houses sank 14.5 percent from February, according to reports last month. Mortgage applications to buy homes plunged 19 percent from a year earlier, indicating slowing demand during what is typically the busiest season for deals.
Economists have been questioning whether the pullback is a result of the unusual weather or the waning of outside influences that fueled the rally. The average 30-year, fixed-rate mortgage rate was 4.2 percent in the reporting period that ended Thursday, up from 3.51 percent in the comparable week a year earlier, according to Freddie Mac, the Federal Home Loan Mortgage Corp. Also, the investors who helped drive up prices in the past two years by buying homes and converting them into rentals are finding fewer distressed properties on the market.
Home Depot said in February that continued strength in the housing market would add 2 percentage points of growth in same-store sales this year, part of a total gain of 4.8 percent. It reiterated that forecast Tuesday.
The company underestimated how the housing market would rebound last year, with its initial forecast calling for a sales gain of 2 percent. Revenue ended up climbing 5.4 percent to $78.8 billion.
"Weather caused a substantial impact on Home Depot and its suppliers through March," said Keith Hughes, an analyst at SunTrust Banks in Atlanta. "The question is, 'Once you get past that, what's the growth rate going to be?' "
Information for this article was contributed by John Gittelsohn and Prashant Gopal of Bloomberg News.
Business on 05/21/2014