Strong demand for everything from paint to concrete helped Home Depot Inc report better-than-expected quarterly sales and profit as one of the warmest U.S. winters on record encouraged homeowners to take up home projects earlier than usual.

The world's largest home improvement chain also gave a better-than expected profit forecast for the year, just days after a report showed U.S. homebuilder sentiment had risen in February to its highest level in more than four years. That report raised hopes that the housing market was stabilizing.

Tuesday's news drove Home Depot shares to their highest level since May 2002 and made some analysts more optimistic about the retailer's prospects.

Credit Suisse analyst Gary Balter said the most important part of Home Depot's strong performance and earnings beat were that they are occurring prior to any sustained housing recovery.

The company's earnings power will rise significantly once the housing market and the economy improve, Balter added.

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Besides the warm winter, Home Depot benefited from having more centralized distribution centers and from recent efforts to shift more employees to jobs where they serve customers directly. It has also been cutting costs more quickly than rival Lowe's , which is due to report its quarterly results next week.

For the current year, Home Depot forecast earnings of about $2.79 a share, 2 cents above analysts' average estimate.

Balter and other analysts said the company's forecast was conservative.

This guidance could be construed as not enough, Janney Capital Markets analyst David Strasser said, but added that the company had a history of being conservative in its outlook.

Home Depot shares were up 76 cents to $47.47 in Tuesday morning trade. They touched a high of $48 earlier in the session.

MAKE HAY WHILE THE SUN SHINES

Home Depot's sales rose 5.9 percent to $16.01 billion in the fourth quarter, ended January 29, well ahead of the analysts' average estimate of $15.51 billion, compiled by Thomson Reuters I/B/E/S.

The company saw strength in categories such as gutters, roofing, vinyl siding, patio furniture, fencing, exterior paint, pressure washers, exterior lighting and concrete.

Sales at stores open at least a year rose 5.7 percent globally, including a 6.1 percent rise in the United States.

Unusually warm temperatures in many parts of the country helped same-store sales by 2 to 2.5 percentage points, Strasser said, adding that demand was very strong for flooring products.

On a conference call, CEO Frank Blake said same-store sales rose in all of Home Depot's top 40 U.S. markets. He also highlighted the steady recovery of some of the hardest hit markets such as Florida and California.

Its major Florida markets outperformed the company average, while California was in line with the average, Blake said.

Quarterly net income rose to $774 million, or 50 cents a share, from $587 million, or 36 cents a share, a year earlier. Analysts on average were expecting 42 cents a share.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn, Maureen Bavdek and John Wallace)

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