The home improvement market is experiencing growth driven by rising incomes, urbanization, and changing consumer preferences, particularly toward renovation and aesthetic enhancements. Thus, investors could consider investing in soaring home improvement stocks Kingfisher plc (KGFHY), Mohawk Industries, Inc. (MHK), and Hooker Furnishings Corporation (HOFT) for growth.
In December 2023, U.S. personal income saw a $60 billion rise (0.3% monthly increase), while disposable personal income increased by $51.80 billion (0.3%). Concurrently, personal consumption expenditures surged by $133.90 billion (0.7%) during the same period, which should bode well for the home improvement sector.
Besides, the residential remodeling market is expanding due to changing preferences and rising disposable income. Moreover, a focus on advanced home automation and eco-friendly materials drives demand for innovative remodeling solutions. The U.S. residential remodeling market is projected to grow at a CAGR of 4.6% from 2024 to 2030.
Moreover, the housing market for 2024 predicts a busier spring buying season with steady price increases, influenced by factors like inventory levels and mortgage rate movements. This year, the home improvement market is expected to see $485 billion in spending, indicating continued consumer interest and resilience in the industry.
Furthermore, Gen Z, ahead in homeownership compared to millennials and Gen X, is poised to dominate the housing market in the next six years, with 71.5% planning to buy their first home.
Considering these conducive trends, let’s examine the fundamentals of three Home Improvement & Goods stock picks, beginning with the third choice.
Stock #3: Kingfisher plc (KGFHY)
Based in London, KGFHY supplies home improvement products and services across the United Kingdom, Ireland, France, and globally through its retail stores and e-commerce channels. Its portfolio includes renowned brands like B&Q, Castorama, and Screwfix, offering a diverse range of home improvement solutions.
KGFHY’s revenue has grown at a CAGR of 4.7% over the past three years. Over the same period, the company’s net income and EPS have grown at CAGRs of 29.6% and 32.9%, respectively.
During the six months, which ended July 31, 2023, KGFHY's sales grew 1% year-over-year to £6.88 billion ($8.69 billion). The company generated gross profit and operating profit of £2.50 billion ($3.15 billion) and £386 million ($487.30 million), respectively. Also, it generated an adjusted free cash flow of £346 million ($436.80 million), up 232.7% from a year-ago period.
KGFHY’s revenue is expected to grow 3.2% year-over-year to $16.47 billion for the fiscal year ended January 2024. Its EPS for the same fiscal year is expected to be $0.56.
The stock has surged 1.9% over the past month to close the last trading session at $5.71. It gained marginally intraday.
KGFHY’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Value and a B for Growth and Stability. In the B-rated Home Improvement & Goods industry, it is ranked #18 among 56 stocks.
Click here to see KGFHY’s ratings for Momentum, Sentiment, and Quality.
Stock #2: Mohawk Industries, Inc. (MHK)
MHK is a major player in the flooring industry, serving residential and commercial markets worldwide with brands like Daltile and Karastan. Its offerings span ceramic tile, carpeting, laminate, and other flooring solutions, catering to diverse consumer needs.
MHK’s revenue has grown at a CAGR of 5.2% over the past three years.
In the fourth quarter, which ended December 31, 2023, MHK reported adjusted net sales of $2.54 billion. The company's adjusted net earnings and EPS attributable to MHK both increased 48.5% year-over-year to $125.26 million and $1.96, respectively. Also, its operating income rose 47.2% from the year-ago quarter to $175.42 million.
MHK’s revenue is estimated to be $10.94 billion for the fiscal year ending December 2024. Its EPS for the same fiscal year is expected to improve 4% year-over-year to $9.56. The company surpassed its revenue and EPS estimates in each of the trailing four quarters, which is promising.
MHK’s shares have increased 17.8% over the past nine months to close the last trading session at $113.74.
MHK’s robust fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Growth and Value. Within the same industry, it is ranked #17.
In addition to the POWR Ratings stated above, access MHK’s Stability, Sentiment, and Quality ratings here.
Stock #1: Hooker Furnishings Corporation (HOFT)
HOFT designs and markets residential and hospitality furniture under brands like Hooker Furniture and Pulaski Furniture, catering to diverse consumer needs. Its extensive product range includes home office, dining, and bedroom furniture, distributed through various retail channels, predominantly in North America.
HOFT’s levered FCF has grown at a CAGR of 39% over the past five years.
During the third quarter, which ended October 29, 2023, HOFT generated net sales of $116.83 million. The company's consolidated operating income and comprehensive income grew 36.6% and 43.8% from a year-ago quarter to $8.77 million and $6.99 million, respectively. Moreover, its EPS rose 54.8% from a prior-year quarter to $0.65.
Street expects its revenue for the fiscal fourth quarter, which ended January 2024, to be $123.24 million. Its EPS for the same quarter is expected to improve significantly year-over-year to $0.60.
The stock has gained 49% over the past nine months to close the last trading session at $24.53. It gained 1.5% intraday.
HOFT’s POWR Ratings reflect this optimistic outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
It has a B grade for Growth, Momentum, and Sentiment. In the same industry, it is ranked #14.
To access additional ratings for HOFT’s Value, Stability, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MHK shares were trading at $114.60 per share on Thursday morning, up $0.86 (+0.76%). Year-to-date, MHK has gained 10.72%, versus a 6.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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