Lowe’s sees higher sales, but quarterly view weak

By Dhanya Skariachan

NEW YORK (BestGrowthStock) – Lowe’s Cos (LOW.N: ), the No. 2 U.S. home improvement chain, reported better-than-expected quarterly results on Monday and said sales would improve in 2010 as demand for remodeling projects picks up.

The results suggest the worst of the economic cycle is over, Chief Executive Robert Niblock said. They also bode well for larger rival Home Depot (HD.N: ), which investors expect to show improved sales trends and better margins than Lowe’s when it reports quarterly earnings on Tuesday.

Homeowners are gradually warming up to bigger renovation projects from painting and new flooring to upgrading appliances and redoing their kitchens, Niblock said in an interview.

But Lowe’s, which plans to buy back up to $5 billion of its stock, also forecast current-quarter profit (Read more your timing to make a profit.) below Wall Street estimates as snowy weather across several U.S. markets kept many of its customers indoors and led to higher maintenance costs.

Lowe’s shares rose initially on the results, but later reversed course to trade down 0.1 percent in the afternoon. Home Depot rose 0.7 percent.

“It’s likely Home Depot will also show sales upside,” Cowen & Co analyst Laura Champine said. “The difference with Home Depot is that they have a lot more margin drivers.”

GRADUAL SALES IMPROVEMENT OVER 2010

Lowe’s profit rose to $205 million, or 14 cents a share, in the fourth quarter ended January 29 from $162 million, or 11 cents a share, a year earlier.

Analysts on average expected 12 cents a share, according to Thomson Reuters I/B/E/S.

Sales increased 2 percent to $10.17 billion, beating the average estimate of about $10.01 billion. Sales at stores open at least a year fell 1.6 percent.

Lowe’s expects same-store sales to range from a 2 percent decline to flat for the first quarter, with earnings of 27 cents to 29 cents a share. Analysts had forecast profit of 33 cents.

For the full year, the company sees total sales rising 4 percent to 6 percent and same-store sales increasing 1 percent to 3 percent. It expects to earn $1.30 to $1.42 a share in the period.

“As we look beyond the first quarter, the outlook is more in line,” Cowen analyst Laura Champine said. “This business has been falling apart for 3 1/2 years. Their results should definitely improve from here.”

Wall Street Strategies analyst Brian Sozzi said Lowe’s full-year sales and profit outlook suggest incremental improvements as the year unfolds.

But he noted that the first-quarter outlook could have been stronger, considering evidence that consumers are becoming more open to home remodeling projects and the housing market is picking up.

Stock Market Today

(Reporting by Dhanya Skariachan; Editing by Derek Caney, Lisa Von Ahn and John Wallace)

Lowe’s sees higher sales, but quarterly view weak