Which Stocks Look Ready to Pop and Drop with Earnings Next Week? (DDD, PCLN, HD, FSLR, GRPN)

Last quarter, Home Depot said its Q3 net income grew by 1.4% to $947 million, or 63 cents a share, from $934 million, or 60 cents a share, a year earlier. Excluding a non-recurring charge related to its prior decision to close seven stores in China, profit equaled 74 cents, which topped the consensus analyst estimate by four cents per share.

Home Depot’s consolidated sales increased by 4.6% to $18.1 billion, which topped the $17.9 billion average estimate.

Comparable-store sales grew by 4.2% on a consolidated basis, which was largely driven by an increase of 4.3% same-store gain at its core U.S. stores.

The value of an average transaction in U.S. stores increased by 2.9% to $54.55 while customer traffic increased by 1.7%. Higher lumber prices accounted for about 70 basis points of the average ticket growth, the company said.

Internationally, Home Depot’s business in Mexico reported its 36th consecutive quarter of positive same-store sales growth. Canada delivered its fourth-straight quarter of positive comps. Home Depot closed the China stores after concluding it couldn’t make its big-box format work profitably in that country as its economy slowed. It will focus instead on specialty formats like paint stores and building its online business in China. It opened two more stores in Mexico during the quarter. …

Outside of earnings, Home Depot has consistently outperformed rival Lowe’s, though we would expect both companies to benefit from the ongoing recovery of the housing market and any Sandy-related bump in sales over the next year or so.

Home Depot is also looking to drive growth in international markets, led by Canada and Mexico as it shifts its focus in China to specialty stores and online operations.