Today’s Housing Starts and Permits data for April came in better than expected, which followed soft housing readings in the preceding two months. Importantly, Starts went back above the one-million unit mark after staying below that key level for the last two months. The prior month’s Starts numbers were revised higher in today’s reading, but still remained below the one-million unit level.
Housing has made a slow start this year, with weather getting most of the blame for the Q1 weakness. But today’s numbers are starting to show some signs of a spring rebound, and will likely help strengthen hopes of further gains in the summer months. This is encouraging following the loss of momentum in yesterday’s homebuilder sentiment survey, which came in weaker than expected.
The favorable housing reading was also corroborated in this morning’s strong Home Depot (HD) earnings report, which beat on the top and bottom lines and guided higher. Unlike Home Depot, Wal-Mart (WMT) came short of expectations. Wal-Mart did produce positive same-store sales growth, though growth came in at the low end of company guidance. A combination of dollar strength and high payroll expenses as a result of its minimum wage hike weighed on results.
Including these retailers, we now have Q1 results from 28 of the 41 retailers in the S&P 500 index that combined account for 81.2% of the sector’s market cap in the index. Total earnings for these retailers are up +2.3% on +6.3% higher revenues, with 78.6% beating earnings estimates and 46.4% coming ahead of revenue expectations. The Q1 beats and growth rate comparisons for the sector were tracking better relative to other recent periods earlier in the reporting cycle, but the comparisons are at best mixed now.
Related podcast interview:
MBA's Michael Fratantoni on the State of the US Housing Market
