Home Depot, Walmart Give the Dow a Tuesday Morning Boost

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The stock market remains near all-time highs, and despite ongoing concerns about macroeconomic issues like inflation, market participants seem to be optimistic about how things are going for many of the largest companies in the world. As of just after 8 a.m. EST, the stock market looked poised for a mixed opening without any major moves. Futures on the Dow Jones Industrial Average (DJINDICES:^DJI) were higher by 51 points to 36,060 Tuesday morning, but S&P 500 (SNPINDEX:^GSPC) futures were down just a quarter-point to 4,679, and Nasdaq Composite (NASDAQINDEX:^IXIC) futures were down 9 points to 16,179.

Earnings season is coming to a close, but there are still some big companies releasing results that have stories to tell about the current state of the economy. Both Home Depot (NYSE:HD) and Walmart (NYSE:WMT) gave their latest readings Tuesday, and the two retail stocks made modest yet significant upward moves in premarket trading that helped push Dow futures higher and signaled a continuing favorable trend for stock prices in the venerable stock market benchmark.

Home Depot keeps cashing in

Shares of Home Depot were up a bit less than 1% in premarket trading Tuesday morning. The home improvement retailer’s third-quarter earnings supported the long-term thesis for the company, as the tailwinds that have helped the company in the past year remained in place.

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Home Depot’s financial results were consistently solid. Revenue was up almost 10% to $36.8 billion. Worldwide comparable sales were up 6.1% year over year, with U.S. comps producing a 5.5% rise. Net income saw a substantial rise of more than 20%, and that lifted earnings by 23% to $3.92 per share. Home Depot saw a decrease in the number of customer transactions during the past three months, but a huge gain in the average amount each customer spent was more than enough to offset the downward pressure of less traffic.

CEO Craig Menear pointed to huge demand for home improvement goods and services, acknowledging the challenging conditions that Home Depot’s team of associates has had to overcome in order to operate effectively. In particular, professional home improvement contractors have had huge backlogs of work to do, and impatient customers have in many cases been willing to pay up in order to get the goods needed despite supply chain problems.

Home Depot’s performance shows that consumers aren’t pulling back on their commitment to invest in their homes. As long as that continues, Home Depot’s stock should be a smart investment for shareholders.

Walmart sees better times ahead

Elsewhere, Walmart shares were also up about half a percent in premarket trading. The retail behemoth continued to see accelerating growth that prompted a boost in its guidance for the full year.

Walmart’s third-quarter financial results were encouraging. Sales of $140.5 billion were up 4.3% year over year, with an 8% rise in e-commerce sales helping to pave the way forward. Comparable sales in the U.S. rose 9.2% from year-ago levels, adding up to a 15.6% rise over the past two years since 2019 before the pandemic began. Adjusted earnings of $1.45 per share came as good news for investors.

Walmart also raised its full-year guidance for the third straight quarter. The company now expects comparable sales to come in above 6%, even excluding the positive impact of rising fuel prices. Earnings guidance of $6.40 per share on an adjusted basis was $0.05 to $0.20 per share higher than the previous range Walmart had provided.

Despite strength in Walmart’s business, its stock price hasn’t delivered much in the way of positive returns in 2021. That could change when investors start to realize that recent growth might be more permanent than they had initially thought.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.