Home Depot(HD Quote) is thought to be intimately connected to the housing market. While that may be true, the actual impact may not be as acute as investors think. Home Depot stock might be a bargain while the economy is still in the early stages of a recovery, and pop when improvement becomes more definite.

Home Depot will report third-quarter earnings tomorrow and analysts are expecting a profit of 36 cents per share, down about 20% from the previous year's quarter. However, analysts have been consistently underestimating the company, which has beaten estimates by as much as 26% this year.

Analysts could be overly pessimistic on the company's prospects or the company could be tempering expectations. Regardless of the reason, beating earnings estimates has helped the stock rise 30% in the past year, while the S&P 500 increased 17%. Shares of rival Lowe's have advanced 11%.

Rival Lowe's said third-quarter profit fell 30% to $344 million, or 23 cents a share. Excluding costs related to store closures and a tax benefit, Lowe's earned 24 cents, meeting analysts' estimates. Company executives said they're starting to see improvement in some of the hardest-hit markets, including California, Florida and parts of the Southwest.

Weak activity in new-home construction has impacted Home Depot, whose sales slid 8% last year and are on pace for a similar drop this year. But considering that the real estate market has completely collapsed in many parts of the country, these declines should be bigger. That suggests that home improvement has helped offset lost new-construction business.