Home Depot Profit Rises, Doesn't Impress Market

Home Depot Inc. (HD), the world's leading home improvement retailer, Tuesday reported a 9.5-percent rise in fourth-quarter profit as store improvements drove sales.

Home Depot's shares fell more than 3 percent as analysts noted that profit matched, but did not exceed average Wall Street estimates.

"It was a very in-line quarter," said Colin McGranahan, an analyst with Sanford Bernstein. "It's probably not as good as people would have liked, but it's certainly nothing bad."

In a research note, Goldman Sachs analyst Matthew Fassler noted a slight decline in operating margin and said investors would likely notice that Home Depot's per-share profit only met consensus estimates after having beaten them all year.

Quarterly net income rose to $1.04 billion, or 47 cents a diluted share, from $951 million, or 42 cents a share, a year earlier. Sales at stores open at least a year rose 4.6 percent.

Total sales were up 11 percent at $16.81 billion.

Analysts on average were expecting profit of 47 cents a share on sales of about $16.7 billion, according to Reuters Estimates. At least two analysts said results trailed their profit estimate by a penny.

Atlanta-based Home Depot, which is remodeling stores with new signs, upgrading its product offering and adding technology enhancements such as self-checkout counters, cited higher customer transactions. Its average fourth-quarter purchase rose 7 percent to $54.13.

Sales were strong in building materials, outdoor power equipment and seasonal categories such as decorative holiday merchandise, the company said. Home Depot's services business, which provides installation of windows and other items, grew 20.4 percent in the quarter.

Home Depot backed its previous forecast of 2005 per-share earnings growth in the range of 10 percent to 14 percent and sales growth of 9 percent to 12 percent.

Home Depot's stock fell $1.36 to $40.66, while rival Lowe's Cos. (LOW) was down 80 cents, or 1.4 percent, at $57.95.