Earnings Put Lowe's Near Another High

The stock rises as the home improvement retailer posts a strong quarter.
Author:
Publish date:

The Mr. Fix-It crowd continues to come up big.

Home improvement chain

Lowe's

(LOW) - Get Report

, a Wall Street darling of late, reported better-than-expected fourth-quarter earnings Monday as consumers kept spending on their homes despite the weak economy.

The company, based in Wilkesboro, N.C., said sales in the fourth quarter rose 15.6% to $5.3 billion, beating the $5.2 billion consensus estimate, according to Thomson Financial/First Call. It reported earnings of 28 cents a share, up from 18 cents a year ago and 3 cents better than the consensus estimate of 25 cents a share. In early February, Lowe's

raised its financial guidance, saying earnings would exceed 24 cents a share, above the then-consensus of 23 cents.

Lowe's and Behold
Big retailer keeps rising

Shares rose 54 cents, or 1.2%, to $46.05, not far from their 52-week high of $48.88.

Lowe's performance, along with an expected strong quarter from rival

Home Depot

(HD) - Get Report

, which is scheduled to report earnings Tuesday, validates the idea that Americans retreated to the home in the wake of Sept. 11, the so-called cocooning thesis popular among analysts.

"Our 2001 performance, combined with the widespread strength we experienced in the second half of the year, support our belief that Americans remain willing to invest in their homes despite the general weakness of the economy," said Robert Tillman, Lowe's chairman and CEO, in a statement.

Lowe's also gave guidance for 2002 that puts it ahead of current Wall Street expectations. For the first quarter it expects sales to jump 20% to 21%, and earnings of 35 cents to 36 cents a share, slightly above consensus of 34 cents. For the full year, Lowe's expects an 18% to 19% jump in sales, and earnings of $1.55 to $1.58 a share, above the current consensus of $1.53.

Last year, Lowe's stock significantly outperformed Home Depot's, as Wall Street

touted Lowe's cheaper stock and greater expansion potential. Shares in Lowe's shot up 108% last year; Home Depot rose about 12%.

As a result, upstart Lowe's caught up with Home Depot on valuation, and now most analysts see the stocks as roughly equivalent in value terms. Lowe's trades at a forward

price-to-earnings ratio of 30.1, while Home Depot trades at 33.8. Both are expected to grow at around 20% annually, according to Thomson Financial/First Call.