Buoyed by the stronger housing market, Home Depot (HD) beat the Street on Tuesday with a 1.4% increase in third-quarter profits and upgraded its full-year financial targets.

Shares of the blue-chip home-improvement retailer rose more than 2% in reaction to the stronger-than-expected numbers.

Atlanta-based Home Depot said it earned $947 million, or 63 cents a share, last quarter, compared with a profit of $934 million, or 60 cents a share, a year earlier. Excluding one-time items, it earned 74 cents a share, topping forecasts for 70 cents.

Sales jumped 4.6% to $18.13 billion, beating the Street’s view of $17.92 billion. Same-store sales increased 4.2% overall and 4.3% domestically. Gross margins dipped to 34.6% from 34.4%.

“Our third-quarter results were better than we expected and reflected, in part, what we believe is the start of the path toward the healing of the housing market," CEO Frank Blake said in a statement.

At the same time, Home Depot raised its 2012 forecast, projecting non-GAAP EPS of $3.03 on revenue growth of approximately 5.2%, compared with an earlier call for EPS of $2.95 on sales growth of 4.6%. Analysts had been calling for EPS of $2.97.

The new guidance includes plans by Home Depot’s management to buy back $700 million in additional shares in the fourth quarter.

Home Depot saw its shares rise 1.78% to $62.25 ahead of Tuesday’s open, putting them on track to build on their 2012 rally of 45%.

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