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Home improvement retailer Home Depot (NYSE:HD) announced wonderful fourth quarter results, in our opinion. Revenue rose 14% year-over-year to $18.2 billion, easily exceeding consensus expectations. Earnings also exceeded consensus estimates, growing 36% year-over-year to $0.68 per share.

Same-store sales expansion outperformed the 1.9% growth rate we saw at Lowe's (NYSE:LOW) earlier this week, jumping 7% year-over-year and 7.1% in the US. Management noted that large ticket items were the standout performer, saying:

Total comp transactions grew by 1.7% for the quarter, while average ticket increased 5.6%. Our average ticket increase was impacted somewhat by commodity price inflation in lumber and copper, which contributed approximately 80 basis points to comp.

Transactions for tickets under $50, representing approximately 20% of our U.S. sales, were up 0.3% for the fourth quarter. Transactions for tickets over $900, also representing approximately 20% of our U.S. sales, were up 9% in the fourth quarter. The drivers behind the increase in big ticket purchases were the strength in generators and appliances.

We believe generators are much more levered to Hurricane Sandy, so we aren't too sure how long that benefit will last. However, appliances have largely lagged the rest of the housing recovery, so we believe appliances will be an area of strength going forward. This could also boost the fortunes of other appliance sellers like Sears (NASDAQ:SHLD), Best Buy (NYSE:BBY) and hhgregg (NYSE:HGG).

Gross margins were virtually flat at 34.9%, as improved shrink control was offset by an unfavorable product mix and higher transportation costs. Since the firm was rushing to supply stores in the wake of Sandy, the higher transportation costs could ease in 2013. While we don't anticipate much gross margin expansion, the firm has done an excellent job leveraging SG&A, which fell 110 basis points to 23.1% of sales. For the full-year, operating margins expanded 100 basis points to 10.4%.

The firm's free cash flow generation was terrific, up 4% to $5.6 billion (compared to 2011), and the company authorized a $17 billion share buyback to be completed by 2015. Home Depot also raised its quarterly dividend 34% to $0.39 per share-an annual yield of 2.3% at current levels. We plan to update our dividend report soon.

Looking ahead, Home Depot believes same-store sales can grow 3% in 2013, with total revenue growing 2% (fiscal year 2013 will be a week shorter than fiscal year 2012). The company is looking for earnings per share of $3.35, about 12% higher than in 2012. Cash flow from operations is anticipated to total $7.2 billion with $1.5 billion in capital spending, meaning we could see another year of free cash flow expansion.

Overall, we liked what we saw from Home Depot, and we think the company is doing a much better job executing than its main competitor, Lowe's. Still, we do not believe shares are attractively priced, and we won't be looking to add the company to the portfolio of our Best Ideas Newsletter at this time.

Source: We Liked Home Depot's Fourth Quarter