Shares of The Home Depot (HD - Free Home Depot Stock Report) rose nicely after the world's largest home-improvement retailer reported better-than-expected fiscal first-quarter (ended May 5th) results. Sales climbed 7.4% year over year, to $19.12 billion, a bit higher than our $18.55 billion estimate. Meantime, comparable-store sales rose 4.3% (up 4.8% in the United States).

Although weather in the April period wasn't as conducive to construction and outdoor projects as it was in 2012 (last year produced an early spring), sales were driven by the ongoing recovery in the housing market. In a positive sign for this sector, growth in the company's professional business actually outpaced the consumer segment in the first quarter. Too, although comps were negative in indoor and outdoor garden products they were positive everywhere else. The Home Depot's move into interconnected retail (such as buy online, pick up in store) has also been well received.

All told, the number of customer transactions increased 2.5% year to year, while the average ticket moved up 5.0%. Investors should be aware, however, that because of a calendar shift (fiscal 2012 contained 53 weeks, while fiscal 2013 is comprised of 52 weeks), the most recent quarter benefited from a seasonal timing change, which added about $574 million to fiscal first-quarter sales.

On the earnings front, share net clocked in at $0.83, which was up 28% from a year earlier and well ahead of our $0.75 call. The gross margin increased 20 basis points and total operating expenses as a percent of sales moved lower by 112 basis points, as higher comps appeared to result in fixed-cost leverage. Stock repurchases also aided per-share comparisons, a trend that will likely continue, as management has already bought back $2.1 billion of stock so far this year, and plans on spending another $4.4 billion over the balance of fiscal 2013.

Looking ahead, momentum in the housing market should continue to provide a tail wind for The Home Depot. Also, the July quarter ought to get a lift from garden sales that were put off in the April term. Consequently, management offered a rosier outlook for this year than it had previously. Sales are now expected to climb 2.8%, to around $76.85 billion, and same-store sales will likely increase about 4% (prior guidance was for gains of 2% and 3%, respectively). Moreover, the company now believes that full-year earnings will come in at $3.52 a share, up from its earlier estimate of $3.37. We continue to believe that management's view is a bit on the conservative side, and have raised our earnings estimate by $0.15 a share, to $3.60.

Adding it all up, we continue to believe that this Dow-30 component is a good selection for a variety of investors. The near-term outlook is bright given momentum in the housing market, and we look for substantial earnings growth this fiscal year. Conservative investors should also like the blue chip's strong marks for Safety and Price Stability, as well as its decent dividend yield.

About the Company:The Home Depot, Inc. operates a chain of 2,257 retail building supply/home improvement “warehouse” stores across the United States, Canada, and Mexico. The company's average store size is around 104,000 square feet indoor, plus 24,000 additional square feet in its garden centers. The Home Depot's product lines include building materials, lumber, floor/wall coverings, plumbing, heating, electrical, paint and furniture, seasonal and specialty items, and hardware and tools.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.