You already know about the surge in home improvement trends during the height of the 2020 COVID-19 pandemic and how homeowners tackled home improvement projects due to spending more time at home.
Does that mean that home improvement retailers have seen their heyday? Not necessarily. The U.S. home improvement market saw the home remodeling market size exceed $340 billion in 2020 and is expected to grow at over 4.1% CAGR between 2021 and 2027, according to Global Market Insights.
Sounds like a good enough reason to invest, right? Let’s dive into why you might still want to invest in home improvement retailers now and the three retailers you can consider.
Why Invest in Home Improvement Retailers Now?
While expected interest rate increases this year could potentially hurt the housing market and consumer spending, spending on home improvement activities by rental property owners due to rental demand will also continue to put money into the industry.
The Home Improvement Research Institute said that the growth of home improvement product sales will ease in 2022. However, the total home improvement market grew by 9.9% in 2021, according to the institute. The total home improvement market grew by 13.8% to $460 billion in 2020.
In the NAHB/Royal Building Products Remodeling Market Index (RMI), the National Association of Home Builders (NAHB) released Q4 reading of 83, up four points from Q4 2020. The NAHB remodelers chair said that many remodelers are completely booked well into the future, though supply chain problems continue to delay projects.
3 Home Improvement Retailers to Consider
Let’s take a look at three home improvement retailers you might want to consider adding to your portfolio.
Lowe’s Companies Inc. (NYSE: LOW)
Lowe’s Companies Inc., based in Mooresville, North Carolina, is a home improvement retailer in the United States and internationally. The company offers products for construction, maintenance, repair and remodeling. The company also offers independent contractors and in-warranty and out-of-warranty repair services. The company owns over 1,900 home improvement and hardware stores.
The company reported net earnings of $1.2 billion and diluted earnings per share (EPS) of $1.78 for Q4 ended January 28, 2022 compared to net earnings of $978 million. The diluted EPS was $1.32 in Q4 2020. Q4 diluted EPS of $1.78 increased 34% from adjusted diluted EPS of $1.33 in Q4 2020.
Total sales for Q4 were $21.3 billion compared to $20.3 billion Q4 2020, and comparable sales increased 5%. Comparable sales for the U.S. home improvement business increased 5.1% for Q4 and pro customer sales increased 23%.
The Home Depot (NYSE: HD)
The Home Depot Inc., based in Atlanta, Georgia, is a home improvement retailer that sells building materials, home improvement products, building materials, lawn and garden products and decor products. The company also offers installation, home maintenance and professional services.
The company also offers installation programs and professional installation, provides tool and equipment rental services. The company caters to the following individuals and groups:
- Professional renovators/remodelers
- General contractors and handymen
- Property managers
- Building service contractors
- Specialty tradesmen
Home Depot retail stores exist in all 50 states, the District of Columbia, Puerto Rico, U.S. Virgin Islands, Guam, 10 Canadian provinces and Mexico.
- Sales for Q4 of fiscal year 2021 were $35.7 billion, an increase of $3.5 billion, or 10.7% from the Q4 fiscal 2020.
- Comparable sales for Q4 of fiscal 2021 increased 8.1% and comparable sales in the U.S. increased 7.6%.
- Net earnings for Q4 of fiscal 2021 were $3.4 billion, or $3.21 per diluted share, compared with net earnings of $2.9 billion, or $2.65 per diluted share from last year.
- Sales for fiscal 2021 were $151.2 billion, an increase of $19 billion, or 14.4%, from fiscal 2020.
- Comparable sales for fiscal 2021 increased 11.4% and comparable sales in the U.S. increased 10.7%.
- Net earnings for fiscal 2021 were $16.4 billion, or $15.53 per diluted share, compared with net earnings of $12.9 billion, or $11.94 per diluted share in fiscal 2020.
Builders FirstSource Inc. (NYSE: BLDR)
Builders FirstSource Inc., based in Dallas, Texas, manufactures and supplies building materials, manufactured components and construction services to professional homebuilders, subcontractors and remodelers. The company offers lumber and lumber sheet goods, steel roof trusses, wall panels, interior and exterior trims and more. The company also offers gypsum, roofing and insulation products. The company also provides other building products and services such as cabinets and hardware, as well as turn-key framing and professional installation services.
At year end, net sales of $4.6 billion increased 23.7%, core organic sales growth of 11.7%, gross profit of $1.5 billion increased 52.5% and adjusted EBITDA increased 110% to $793.4 million on a combined pro forma basis. Net income grew 216.2% to $442.5 million, or $2.31 per diluted share.
In Q4 2021, net sales of $4.6 billion for the period increased 23.7% and gross profit of $1.5 billion increased 52.5%. Net income of $442.5 million, or $2.31 per diluted share and adjusted net income of $532.4 million or $2.78 per diluted share. Adjusted EBITDA increased 110.0% to a record Q4 $793.4 million driven by commodity values, pricing and strong demand in the residential housing market.
Check Out These Home Improvement Retailers
When you think about all the stocks you can invest in, you might skip over home improvement stocks. However, despite the fact that home improvement stocks have changed over the last two years, you can still benefit from them in the here and now and over the course of time.
You simply have to look at the ongoing strength of home sales, house price appreciation and residential construction activity. Take a quick look at these stocks and other retailers that will help you through the pandemic and beyond.
Should you invest $1,000 in Home Depot right now?
Before you consider Home Depot, you’ll want to hear this.
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While Home Depot currently has a “Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
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