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Home Depot Sales vs Lowe’s Earnings – Which Retail Stock is Better? (LOW, HD)


The respective first-quarter earnings numbers for the world’s two largest home improvement stores are in, and the results show that do-it-yourself consumers are back to spending big bucks.  On Tuesday, No. 1 home-improvement retail stock Home Depot (HD) came out with a strong first-quarter earnings beat.  One day earlier, rival and No. 2 home-improvement retail stock Lowe’s (LOW) bested its first-quarter earnings estimates. Both HD and LOW stock saw improved sales as a result of the government’s first-time home buyer credit and rebates for energy efficient appliances.  And while both retail stocks Home Depot and Lowe’s enjoyed solid Q1 performances in their earnings, the battle between these two titans is far from equal.

Home Depot earnings reported that HD first-quarter profit rose 41%, as the company saw strong demand for big-ticket items, including appliances.  HD’s net income came in at $725 million, or 43 cents a share, well above the $514 million, or 30 cents a share, earned in the same quarter last year. (See last quarter’s Home Depot earnings report here)  The company’s sales rose 4.3% to $16.86 billion in the quarter, with global same-store sales rising 4.8% in the quarter. Excluding charges related to the extension of the company’s guarantee of a third-party senior secured loan, Home Depot would have earned 45 cents a share. Consensus estimates for the quarter called for EPS of just 40 cents on sales of $16.4 billion.

Lowe’s earnings report said Q1 profit for LOW stock jumped 2.7%, and like Home Depot the company also saw increased demand for appliances and other big-ticket items.  Net income in the quarter was $489 million, or 34 cents a share, up nicely from the $476 million, or 32 cents, one year ago. Sales climbed 4.7% to $12.4 billion in Q1, and same-store sales climbed 2.4%.  (See last quarter’s LOW stock earnings report here) The numbers bested consensus forecasts for EPS of 31 cents, and sales of $12.2 billion.  Lowe’s numbers were good, but not nearly as stunning as those of Home Depot.  However, the real edge for HD over LOW can be found in the differing full-year forecasts.

Home Depot raised its full-year profit forecast, and the company now sees EPS of $1.88 on sales growth of 3.5%. The previous guidance called for a full-year profit of $1.79.  The consensus estimate for HD’s full-year performance was $1.86 on sales growth of 2.9%.  It was a different forecast story for Lowe’s.  The retailer did raise its full-year profit forecast to $1.37 to $1.47 a share; however, that revised figure fell short of consensus estimates calling for a full-year profit of $1.45 per share.  The tepid forecast caused LOW shares to sell off sharply in Monday and Tuesday trade.  HD shares saw some upside on Monday, but the stock was in the red midway through Tuesday trade.

When it comes to the battle of DIY-store earnings, we see that Home Depot is the clear victor.  And what about the respective stock performances?  Here too, we see that HD has outperformed its rival.  Over the past three months, HD stock shares are up 21%, while LOW stock shares have risen just 11%.  If we look at both companies’ share price performance over the past 12 months, the gap narrows. Still, HD stock is the winner with a 46% jump over the past year, while LOW stock has risen 37%.

Whether you look at current earnings, full-year forecasts or share price appreciation, Home Depot is the clear winner in the battle of the home-improvement titans.  The question now is will it continue to maintain its edge over Lowe’s.  Well, as the old adage goes, only time will tell.

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