Lowe’s earnings forecasts are outperforming, adhering to full-year guidance. Arrow jumps.

The company reported earnings per share of $4.56 for the quarter, beating FactSet’s forecast of $4.47. Revenue of $25 billion was in line with analyst estimates.

Comparable store sales fell 1.6% for the period, less than the 2.6% decline expected by analysts polled by FactSet. The company said a “strong rebound in the spring” and growth in online sales offset the lumber contraction and lower discretionary demand in “handicrafts”.

Lowe’s sees comparable store sales decline between 2% and 4% for the full year, with earnings per share of $13.20 to $13.60 and revenue of $87 billion to $89 billion. That’s very much in line with Wall Street, which expects a profit of $13.33 a share on sales of $88 billion.

This is breaking news. Read a preview of Lowe’s earnings below and check back for more analysis soon

Home Depot’s better-than-fear earnings gave investors hope that the home improvement sector’s challenges may soon be over. This does not mean results from Lowe’s
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Tuesday morning, it’s going to be beautiful.

Last week, Home Depot (stock ticker: HD) beat earnings forecasts and reiterated its financial forecast for the fiscal year, resulting in a series of increases in share price targets.

“Home Depot’s strong win in the second quarter raises hopes that the worst of the 2023 home improvement downturn is behind us,” Evercore ISI analyst Greg Milich wrote in a note after the results.

Foot traffic seems to support Mellish’s assertion. Visits to Lowe’s and Home Depot are down year-over-year, but have improved over the summer, according to data from Placer.ai.

But the better home improvement outlook for the latter half of the year doesn’t affect the second quarter results Lowe’s is about to report.

In fact, most analysts cut their earnings estimates for Lowes’ second quarter after the company lowered its forecast in May. Uncertainty about the home improvement sector, exacerbated by comments from Home Depot last Tuesday that shoppers remain wary of spending on big-ticket items, has led to more cuts in recent weeks.

The Street now expects Lowe’s to post adjusted earnings of $4.47 per share, compared to the consensus of $4.49 at the end of July. Revenue estimates of $25 billion remained largely unchanged.

The home improvement sector has been pressured by a lack of activity in the housing market. High mortgage rates alienate potential buyers, and they cut off from the renovation projects that often happen after buying a home. Deal with inflation and an unusually cold spring, and even interest in do-it-yourself projects has waned.

This is particularly annoying for Lowe’s because DIY makes up roughly 75% of its revenue. In fact, Home Depot’s strength this quarter came from improvements in West Coast sales, as well as sales to professional builders, two areas where Lowe’s has less exposure, Melich wrote. About half of Home Depot’s annual sales come from its professional business. Lowe’s derives about a quarter of the contractors.

Sure enough, Lowe’s is establishing its own business serving contractors, as well as expanding its client base to new demographics, including rural communities. Early indications are that the investments are working, as well Barron Previously mentioned.

In 2019, Pro sales accounted for 19% of annual sales, compared to about the current 25%. And although foot traffic at Lowe’s lagged Home Depot from March to June, it faltered in July, according to Placer.ai.

Lowe’s shares closed down 0.8 percent on Monday. Shares are up 9.2% this year, ahead of Home Depot’s 2.6% jump, but underperforming.

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Write to Sabrina Escobar at [email protected]