Home Improvement Stocks…Improving

11/16/2012 12:00 am EST

Focus: STOCKS

It looks like the numbers are backing the home improvement sector, and the stocks are certainly this year's Cinderella story. A few more earnings are out next week and this train may be officially leaving the station again says Chris Preston of Daily Profit.

Want more evidence that a housing recovery is underway? Look no further than Home Depot’s (HD) latest earnings report.

The home-improvement chain released third-quarter earnings this week, and same-store sales increased 4.2% from a year ago. Better yet, the company upped its 2012 forecast by 8 cents to $3.03 per share for the year. Its revenue growth forecast also increased from 4.6% to 5.2%.

The solid earnings were enough to push Home Depot shares up 4.5% Tuesday morning. At just under $64 a share, the stock has reached a new 52-week high.

Home Depot’s earnings should be music to the ears of fellow home-improvement chain Lowe’s (LOW), as well as Toll Brothers (TOL), and Pier 1 Imports (PIR). Those companies all report third-quarter earnings in the next few weeks. Lowe’s reports earnings next Monday.

Those earnings reports should shed more light on the state of the housing market. But Home Depot’s improved sales are certainly a good sign. It’s just the latest in a series of signs that a long-anticipated housing recovery has finally arrived.

Housing starts jumped to a four-year high in September, increasing 35% from a year ago. That followed an August in which existing home sales rose 9% from the previous year.

With signs of a recovery everywhere, the two main ETFs that track the housing market have gone through the roof this year. The iShares Dow Jones US Home Construction ETF (ITB), whose holdings include Home Depot, Lowe’s, and Toll Brothers, is up 65% year-to-date. The SPDR S&P Homebuilders ETF (XHB), meanwhile, has returned more than 46% this year. Home Depot shares have risen 51% in 2012.

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