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Home Depot Rises Post Q3 Earnings: ETFs to Buy

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On Nov 16, Home Depot (HD - Free Report) reported quarterly earnings and revenues before the market opened that beat analysts’ forecasts. The world’s largest home improvement specialty retailer came up with quarterly earnings of $3.92 per share, beating the Zacks Consensus Estimate of $3.41. This compares with earnings of $3.18 per share a year ago. Shares gained 5.73% in the key trading session on Nov 16.

The Zacks Rank #2 (Buy) Home Depot posted revenues of $36.82 billion for the quarter ended October 2021, surpassing the Zacks Consensus Estimate by 5.28%. This compares with year-ago revenues of $33.54 billion. The upbeat results were possible due to customers’ diligent spending on home-improvement projects. Same-store sales rose 6.1% in the quarter, beating StreetAccount estimates of 2.2%, as quoted on CNBC.

Such upbeat results call for investments in HD-heavy ETFs like VanEck Retail ETF (RTH - Free Report) , Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) and SPDR Dow Jones Industrial Average ETF Trust (DIA - Free Report) . This is especially true given that the Building Products – Retail industry, which Home Depot belongs to, falls in the top 11% section of 253 total industries covered by Zacks.

Why the Hype?

A strong housing market is believed to have benefitted Home Depot and rival Lowe’s (LOW - Free Report) , per the above-mentioned CNBC article. Lowe’s, another leading home improvement retailer, offering services to homeowners, renters and commercial business customers, also holds a Zacks Rank #2.

There has been strong demand for materials from home professionals, making up for lower demand from the do-it-yourself projects. HD holds a larger share of the professional market, although LOW is giving tough competition. Consumers spent more when they visited Home Depot, raising the average ticket by 12.9% to $82.38. Sales per square foot of Home Depot increased by 6.2% in quarter.

ETFs in Focus

While investing in Home Depot is always an option, investors can have a wider coverage of the upbeat consumer discretionary sector with the HD-heavy ETFs. Against this backdrop, below we highlight the above-mentioned ETFs in detail.

VanEck Retail ETF  

The VanEck Retail ETF replicates as closely as possible, before fees and expenses, the price and yield performance of the MVIS US Listed Retail 25 Index. RTH tracks the overall performance of companies involved in retail distribution, wholesalers, on-line, direct mail and TV retailers, multi-line retailers, specialty retailers, and food and other staples retailers.

Home Depot takes the second spot of VanEck Retail ETF with about 16.36% weight. In total, RTH holds 25 stocks. RTH charges 35 bps in fees and has a Zacks Rank #2.

Consumer Discretionary Select Sector SPDR ETF

The Consumer Discretionary Select Sector SPDR ETF seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Consumer Discretionary Select Sector Index. The index seeks to provide an effective representation of the consumer discretionary sector of the S&P 500 Index.

The ETF XLY charges 12 bps in fees. Home Depot holds the third spot in Consumer Discretionary Select Sector SPDR ETF with about 8.77% exposure. XLY has a Zacks Rank #2.

SPDR Dow Jones Industrial Average ETF

The SPDR Dow Jones Industrial Average ETF Trust seeks to provide investment results that corresponds generally to the price and yield performance of the Dow Jones Industrial Average. The Dow Jones Industrial Average is composed of 30 blue-chip U.S. stocks.

Home Depot takes the third spot in DIA with 6.77% exposure. SPDR Dow Jones Industrial Average ETF has a Zacks Rank #2 and yields a decent 1.56%.

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