Earnings Beat Lifts Lowe's

Niblock said Lowe's previous guidance was based on the belief that the housing market and its impact on the business was at or near the bottom.

"When housing will bottom is certainly a topic of debate," he said on the call. "Much of the external data received over the past three months has fallen short of analysts' mean estimate, suggesting parts of the housing market may still be in the process of bottoming. In addition, while we're not directly at risk with regard to some problem mortgage lending and exposure, the impact of the fallout from increasing foreclosure rates among higher-risk borrowers and tightening lender standards for all mortgage applicants is something we'll continue to watch closely."

David Strasser, an analyst for Banc of America Securities, says it's unusual for Lowe's to anticipate flat same-store sales, which have been on the decline since last year's second quarter.

"We do caution that there is most likely another downturn to housing in August as credit markets dry up," Strasser wrote in his research. "But that being said, between LOW and HD, we are seeing an industry with more defensible margins in a downturn than we had anticipated in the past. With a weak competitive landscape, and two dominant players, the promotional landscape has remained rational. This, along with better mix and ongoing sourcing improvements, drove the margin in our opinion."

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