E The Home Depot: Buy The Serial Dividend Raiser

The Home Depot (NYSE: HD ) has just reported earnings and the stock looks set to move on the news. As you know this is our home improvement store of choice that we highlighted well over one year ago with a buy recommendation. The Home Depot remains a strong name. That is right. It is a retailer and one that is doing well. While the retail sector is getting demolished, and HD did take a hit thanks to the selling, it is back up and only a few points off its 52 week high. The name is still a pin action play on a strong housing market, as well as a strong economy, but it is a retailer nonetheless. We stand by this pick because it has delivered, and much of the selling is noise related to overall fears in the sector. Now we are in 2018, so the question is do we stick by the name? The answer is a resounding ‘yes,’ but we need to check into the performance of the company.

Home Depot’s just reported earnings were once again strong. In fact, it was once again a dandy of a quarter. That said, the company still has a valuation that is pricing continued growth at 24 times current earnings. But this is justifiable if the growth continues, and frankly, the growth is evident. Judging from this performance in Q4, the growth is there and looks set to continue, so its pricing is still justified. Barring overall market turmoil, it’s going higher.

The company saw strong Q4 sales of $23.9 billion. This was a 7.5% increase compared to Q4 2016, and beat by a solid $240 million against consensus, and surpassed our more bullish expectations by $100 million.

We think comparable store sales tell an even stronger story. In fact, they were one of the largest highlights of the report. They came in +7.5% in Q4, and comparable sales for U.S. stores continue to be strong, coming in at +6.2%. This continues to be solid growth for a company of this size and continues a long run of growth. While there was recent selling pressure, so far the company is holding up its end of the bargain for our 2017 buy call. The data also clearly suggests it was a good call as a top choice in the retail space, which is still being battered.