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Shares of The Home Depot (HD Free Home Depot Stock Report) rose slightly after the world's largest home-improvement retailer announced fiscal second-quarter (ended July 31st) results that were in line with expectations and raised full-year earnings guidance.

Sales came in at $26.472 billion, up 6.6% from a year earlier and on par with our call of $26.425 billion. Meantime, comparable-store sales climbed 4.7% (up 5.4% in the United States). This figure was in line with expectations, too. Other sales metrics also improved, as the number of transactions climbed 2.3%; the average ticket rose 2.4%; and sales per square foot advanced 4.3%. Top-line gains were broad based across geographies and categories, with a few standouts, including appliances. Sales to professionals outpaced those to do-it-yourself customers, and big-ticket sales (those over $900) were up 8.1% and made up 20% of sales on our shores. Additionally, online sales jumped 19% and made up 5.6% of the top line. The housing market continued to provide a tail wind, as favorable trends in household formation, home price appreciation, and housing turnover are ongoing. Unfavorable currency movements resulted in a $181 million headwind on the top line.

Moving down the income statement, the gross margin was essentially flat, rising three basis points from a year earlier. There was also some improvement on the expense line, as total operating expenses decreased 78 basis points as a function of the top line. This was a bit better than expected and reflected $92 million worth of pretax expenses in the second quarter of fiscal 2015 that did not reoccur in the recently completed interim. Stock repurchases also gave a lift to per-share figures, and earnings rose nearly 19% year over year, to $1.97 a share, matching our forecast.

Looking at the second half of fiscal 2016, the good times should continue for this retailing giant. In fact, the aforementioned factors that drove the strong July-quarter performance ought to support results in the back half of the year. While calendar-year GDP forecasts have been ratcheted down some after a lackluster showing in the first half of the year, management looks for the housing tailwind to pick up the slack, and its estimate for year-over-year top-line growth was maintained at 6.3%. Too, comps are still expected to rise 4.9% for the whole of fiscal 2016. Likewise, the gross margin is still anticipated to be flat from a year earlier, and the tax rate should be about 37%, unchanged from prior forecasts. However, good expense management caused leadership to raise its share-net forecast by $0.04, to $6.31. If achieved, this would represent a year-to-year gain of 18%. We believe the retailer will hit its bottom-line target and have raised our fiscal 2016 earnings call to the $6.31 level.

As for Home Depot stock, it's trading close to its all-time high, so value investors will probably find it a bit expensive for their liking. We think this equity is best suited for conservative investors seeking exposure to the housing market and a modicum of income.

About the Company: The 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.