After Home Depot earnings topped estimates for the January fiscal fourth quarter on Tuesday, Lowe's followed suit on Wednesday. While both home-improvement retailers issued a softer-than-expected earnings outlook for the current year, analysts touted the shift to positive comparable-store sales as a confidence builder. LOW and HD stocks are rallying for a second day in early stock market action.
The pullback in the 10-year Treasury yield to a two-month low on Tuesday has also lent support.
HD Upgraded To Hold
HSBC analyst Daniela Bretthauer upgraded her rating on HD stock to hold from reduce, while raising her price target to 410 from 356. She cited the inflection to positive same-store sales.
In a Tuesday note, D.A. Davidson analyst Michael Baker wrote that Home Depot's positive comparable-store sales for the first time in more than two years "tells us that the worst is behind us in this space."
The below-consensus earnings outlook "is certainly a concern," he wrote. "We see it as the combination of setting a lower bar," he wrote, "as well as some early first quarter data which is not as strong as November and December."
On the earnings call, Home Depot management reported a "meaningful lift" in its pro category sales, and said it was making "significant progress" in reducing losses through theft, which had risen to damaging levels over the last several years.
In the earnings statement, Home Depot CEO Ted Decker said that Q4 results benefited from "greater engagement in home improvement spend, despite ongoing pressure on large remodeling projects."
Lowe's Earnings
Estimates: Analysts saw Lowe's earnings rising to $1.84 a share, up 3.9% from a year ago, as sales slipped 1.7% to $18.28 billion.
Results: EPS rose 9% to $1.93, while sales dipped 0.3% to $18.55 billion.
Comparable-store sales rose 0.2%, which Lowe's said reflected high-single-digit percentage gains in Pro and online comps and rebuilding efforts in the wake of recent hurricanes.
Outlook: Lowe's said it expects total sales of $83.5 billion to $84.5 billion, with the midpoint below forecasts of $84.43 billion, according to FactSet. The company's outlook for EPS to range between $12.15 and $12.40 trailed $12.46 forecasts.
Home Depot Earnings
Estimates: Analysts expected Q4 earnings per share of $3.04, up 7.8% from a year ago, as sales rise 12.6% to $39.15 billion
Results: Adjusted EPS rose 9.4% to $3.13. Sales grew 14.1% to $39.7 billion.
Outlook: For the new fiscal year, Home Depot expects adjusted earnings to fall 2% from $15.24 in fiscal 2024. Analysts were forecasting growth to $15.65, according to FactSet.
Home Depot expects 2.8% sales growth, or $163.98 billion, roughly in line with $164.08 billion estimates.
Comparable-store sales should rise about 1%, Home Depot said, below 1.7% forecasts.
HD, LOW
HD stock rose 1l25% to 398.22 in early Wednesday stock market action. On Tuesday, Home Depot climbed 2.8%.
HD stock finished on Monday about where it was on Nov. 6, when it sold off even as the broader market surged in the start of a Trump election rally.
LOW rallied 4.5% to 253.37 early Wednesday, after climbing 2.2% on Tuesday, following Monday's six-month low.
Be sure to read IBD's The Big Picture column after each trading day to 0the latest on the prevailing stock market trend and what it means for your trading decisions.
