There’s no sugarcoating it: The past few weeks have been rough for the U.S. economy. Last week, we found out that retail sales fell flat in April. And the prior week’s March trade report was horrific. Between the cautious American consumer and the huge trade deficit, I expect the first-quarter Gross Domestic Product (GDP) to be revised lower next week.
However, amidst all of this bad news, there is one notable bright spot to the economy, and that’s the housing market:
The Commerce Department revealed this morning that home construction surged in April, with U.S. housing starts increasing 20.2% to an annual rate of 1.14 million homes, the fastest pace since November 2007. Single-family home construction rose 16.7% in April, while apartment building surged 31.9%. Building permits increased 10.1% over March to an annual rate of 1.14 million last month. The jump in housing starts and building permits in April could very well be the prelude to an increase in new homes sales in the upcoming months.
This is great news, and investors would do well to take note of any buying opportunities tied to the housing recovery. To get you started, I have one home improvement retailer that I’m recommending to my Blue Chip Growth readers:
The Home Depot Inc. (HD) is the world’s largest home improvement retailer. From air conditioning units to gardening supplies to home appliances to electrical fixtures, this store is a one-stop-shop for all home improvement needs.
And just this morning, The Home Depot revealed that it had a strong start to 2015. According to management, the continued recovery of the U.S. housing market drove higher sales at the home improvement retailer.
Compared with Q1 2014, net income improved 14.3% to $1.6 billion, or $1.21 per share. Excluding special items, including settlement benefits, adjusted earnings per share was $1.16. This beat the consensus estimate by a penny, or by 1%. Over the same period, net sales climbed 6.1% to $20.89 billion. This also topped the $20.82 billion consensus estimate by a hair.
Pleased with these results, Home Depot also lifted its outlook for FY 2015. The company now forecasts between 11% and 12% annual earnings growth, or between $5.24 and $5.27 EPS. This is above the Street view of $5.23 EPS for FY 2015. Meanwhile, Home Depot also expects to post between 4.2% and 4.8% annual sales growth; this is in line with the 4.4% consensus estimate. HD is an A-rated Strong Buy.
Tomorrow, another one of my top housing plays is reporting earnings. If you’d like to learn more, you may want to consider a risk-free run of my Blue Chip Growth membership by clicking here.
P.S: I will be speaking at the Cincinnati Airport Marriott Newton in Hebron, Kentucky on Tuesday, May 20th and the Cleveland Marriott East in Warrensville Heights, Ohio on Wednesday, May 21st. These seminars start at 7 PM and you may attend at no cost, but please call 800-454-1395 to register. I will review where investors can achieve the highest yields in both bonds and stocks, as well my current market outlook, favorite stock picks and have an extensive question and answer session.