Shares of The Home Depot (HD Free Home Depot Stock Report), the world's largest home-improvement retailer, were little changed following the release of fiscal third-quarter (ended October 29th) results, even though the figures were solid and management increased its full-year fiscal 2017 top- and bottom-line guidance. Sales in the October period rose 8% from a year earlier, to $25.026 billion, eclipsing our $24.475 billion forecast. Comparable-store sales jumped 7.9%, while stores in the United States posted a 7.7% comp gain. Underlying demand was clearly solid, but hurricane-related sales gave a $282 million boost to comparable-store sales, according to management. The quarter was unique given the amount of natural disasters that occurred during the three-month span. In addition to major hurricanes Harvey, Irma, and Maria, there were wildfires in the western United States and earthquakes in Mexico that prompted spending on repair and rebuilding initiatives. On top of the headline numbers on sales and comps, the number of customer transactions was up 2.5% from a year earlier; the average ticket increased 5.1%; and sales per square foot rose 7.9%. Online sales continued to do well, rising 19% year to year and making up 6.2% of the top line. Sales to professionals once again outpaced growth in the do-it-yourself segment. Big-ticket sales (those above $900) were up 12.1%, driven by categories such as flooring and appliances.

While the aforementioned natural disasters gave a boost to the top line, the gross margin on hurricane-related sales was below the company average. Combined with $104 million in hurricane-related damage suffered by The Home Depot, the storms actually hurt operating profit to the tune of $51 million in the October interim. Indeed, the gross margin contracted 17 basis points on a year-over-year basis, to 34.56%. Conversely, SG&A decreased 44 basis points as a function of the top line. A lower share count also helped earnings per share jump 15% from the comparable fiscal 2016 figure, to $1.84, matching our forecast. 

Looking ahead, the housing market continues to make strides and should keep acting as a tailwind for The Home Depot. Additionally, repair and rebuilding efforts are still ongoing in several markets, so we expect to see additional demand in the January term, with the bump tailing off during the first half of fiscal 2018. All told, leadership now looks for sales and comps to increase 6.3% and 6.5%, respectively, for the year, each up one percentage point from prior guidance. The estimate for stock repurchases was also raised by $1 billion, to $8 billion. Consequently, share earnings are now pegged at $7.36 a share, up from $7.29. We've added a penny to our target to match the retailer's call, but think that there is more upside than downside to this number.

As for the stock, it is trading near its all-time high, which may turn off deep value investors. However, these shares are an enticing selection for most other accounts, in our view, including those with a very conservative bent or a focus on growth and/or current income.

About the CompanyThe Home Depot, Inc. operates a chain of 2,275 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.