Since the announcement of its 3Q16 earnings on November 15, 2016, Home Depot’s (HD) stock price has risen 8.1%. As of January 23, 2017, Home Depot was trading at $138.1—close to its 52-week high of $139.
In November, the Federal Housing Finance Agency announced that in 3Q16, the housing price index rose 1.5%. The rise in house prices could encourage homeowners to remodel and upgrade their houses. It could boost home improvement retailer sales. In 3Q16, Home Depot posted EPS (earnings per share) of $1.6—beating analysts’ estimate of $1.58. After posting strong 3Q16 earnings, the company raised its EPS guidance for 2016 to $6.33 from its earlier guidance of $6.31.
All of these factors, along with the improving US economy, appear to have increased investors’ confidence. It led to a rise in Home Depot’s stock price. In December 2016, the unemployment rate fell to 4.7%, while average hourly labor wages rose to $26.
2016 stock performance
It’s important to note that 2016 was a tough year for home improvement retailers. Only Home Depot had positive returns of 2.3%. During the same period, the stock prices of Lowe’s (LOW), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) fell 5.5%, 15.8%, and 16.2%, respectively.
In 2016, the SPDR S&P Homebuilders ETF (XHB), the broader comparative index, returned 1%. XHB invests more than 19.0% of its holdings in home improvement retailers.
Next, we’ll look at what analysts recommend for Home Depot.