NEW YORK (
fourth-quarter report is signaling -- at least from the perspective of Lowe's -- that the worst of the housing crisis may well be over. (We'll see what
has to say about it later this week.)
Lowe's reported a 26.5% jump in quarterly earnings that reached $205 million, or 14 cents a share. This topped analysts' expectations for the home improvement retailer by 2 cents.
Lowe's received a boost from rising lumber prices and an increased demand for appliances. Sales rose 1.8% to $10.2 billion, while same-store sales slipped 1.6%.
Lowe's noted in the announcement that it believes the worst of the economic cycle is over and saw an improvement in bigger-ticket items.
As a result, J.P. Morgan analyst Christopher Horvers predicts same-store sales will turn positive for the first time in four years during the peak spring selling season in the second quarter. Lowe's management foresees a same-store sales increase between 1% and 3% this year.
Lowe's also announced plans to buy back up to $5 billion of common shares.
Still, guidance remains conservative. Lowe's forecasts first-quarter earnings between 27 cents and 29 cents a share, and full-year earnings in the range of $1.30 to $1.42 a share. This is significantly lower than Wall Street's consensus of 33 cents in the first quarter and $1.37 for the year.
"The company's guidance is disappointing in our opinion, considering the external catalysts that include consumers becoming open to home remodeling projects and activity in the existing/new/foreclosed home sales market," Wall Street Strategies analyst Brian Sozzi wrote in a note.
"The first-quarter guidance leaves us wondering if poor weather conditions in the U.S. has caused quarter-to-date comparable sales to be soft, with the management team looking for strengthening trends as the quarter moves along as consumers purchase spring merchandise."
Investors have been debating for some time as to whether or not Lowe's or rival Home Depot is the better play on the housing market. Home Depot, which is slated to report its fourth-quarter results on Tuesday, was the favorite going into fourth-quarter earnings. But shares of Lowe's are gaining 1.6% to $23.50 in pre-market trading despite the dour outlook.
Sozzi advises to steer clear of Lowe's stock unless the conference calls reveals the retailer is driving greater efficiencies from its existing asset base or is not ceding market share to a "revived major competitor."
-- Reported by Jeanine Poggi in New York.
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