Updated from 8:09 a.m. EDT
Lowe's (LOW - Get Report) delivered nearly 18% earnings growth in its second quarter and said the swelling ranks of U.S. homeowners aren't acting like the country is on the doorstep of recession. The news sparked a 6% gain in the retail chain's shares and helped underpin a broader market rally.
"The housing market remains strong and vibrant," a company executive said at a post-earnings conference call with analysts. "Mortgage rates, while not as widely noticed, have actually declined and are hovering around 6%, a very attractive rate for buying a home."
The company also noted that consumer confidence is approaching a three-year high, that employment continues to improve and that U.S. home ownership rates are above 69% for the first time. "These are great signs for improved strength in the home improvement market and give us increased confidence."While Lowe's second quarter showed strong growth, net income was slightly below Wall Street estimates because of a since-reversed demand falloff in June. The Mooresville, N.C., retail chain earned $704 million, or 89 cents a share, in the three months ended July 30, up from $597 million, or 75 cents a share, last year. Sales rose 17.4% from a year ago to $10.17 billion, a company record, while same-store sales were up 5.1%, short of the company's expectations, vs. a 7% same-store sales increase last year. Analysts had been forecasting earnings of 91 cents a share on sales of $10.28 billion in the most recent quarter. Shares were recently up $3, or 6.4%, at $49.65. The stock price is roughly flat with last year's levels. Inflation in lumber prices benefited the quarter's results, Lowe's said, as lumber pricing is about 40% higher than it was last year. That favorably impacted same-store sales by 200 basis points.