Driven by strong performance across all geographies due to a rise in transactions and strength in its core store activities, The Home Depot Inc. (HD - Analyst Report) reported an improvement in its financial results for the third quarter of fiscal 2014. The company’s adjusted earnings of $1.15 per share jumped nearly 21.1% from the year-ago quarter’s earnings of 95 cents and surpassed the Zacks Consensus Estimate of $1.13.

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Quarterly Details

Net sales increased 5.4% to $20,516 million from $19,470 million in the year-ago quarter and beat the Zacks Consensus Estimate of $20,418 million. The company’s overall comparable-store sales (comps) increased 5.2% while comps in the U.S. stores grew 5.8%. The year-over-year improvement in top-line was mainly attributable to a 3.2% rise in the number of customer transactions and an increase of 2.3% in average ticket size.

Gross profit grew 5.7% to $7,185 million from $6,798 million in the comparable year-ago quarter, primarily due to higher sales. Gross profit margin expanded 10 basis points, compared with last year, to 35%.

Operating profit during the quarter improved 11.3% to $2,553 million from $2,293 million in the year-ago comparable quarter. Operating margin expanded 60 basis points (bps) to 12.4% from 11.8% in the year-ago quarter. The improvement in operating margin was driven by effective cost management.

Balance Sheet and Cash Flow

Home Depot, which competes with Lowe’s Companies Inc. (LOW - Analyst Report), ended the quarter with cash and cash equivalents of $2,181 million, long-term debt (excluding current maturities) of $16,693 million and shareholders’ equity of $10,110 million. During the first three quarters of fiscal 2014, the company generated $6,247 million of cash from operations and deployed its available funds for buying back shares worth $5.6 billion, dividend payment of $1.9 billion, capital expenditures of nearly $1 billion and long-term debt repayment of $30 million.

Fiscal 2014 Outlook

After concluding the third quarter, Home Depot reaffirmed its sales growth outlook of 4.8% for fiscal 2014. The company now expects diluted earnings per share growth of 21% for fiscal 2014 with earnings of $4.54 per share.

Further, management revealed that the company’s earnings guidance includes a benefit of the company’s year-to-date share buybacks worth $5.74 billion as well as an estimated $34 million for breach-related costs. Moreover, the company intends to repurchase another $1.26 billion worth of shares during the fourth quarter.

Other Stocks That Warrant a Look

Currently, Home Depot carries a Zacks Rank #3 (Hold). Better-ranked stocks worth considering in the retail sector are L Brands Inc. (LB - Analyst Report) and Zumiez Inc. (ZUMZ - Analyst Report), both holding a Zacks Rank #2 (Buy).

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