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Updated from 8:55 a.m. EST


may have reported a standout quarter on Thursday, but investors may be wondering how long the company can keep it up.

In its third quarter, the home-improvement retailer posted a 30% jump in per-share earnings. Lowe's performance, which exceeded both the company's own projections and analysts' estimates, was boosted by a 24% gain in sales and strong cost controls.

But the company gave investors some reason to worry by forecasting that its fourth-quarter profits may come in below analysts' expectations. And some investors are already wondering whether the company's exceptional third-quarter results were just an aberration.

Lowe's benefited from the easy comparisons with last year, the strengthening economy, the continuation of the refinancing boom and the tax rebate checks that were sent out in the third quarter, said Jay Ferguson, a portfolio manager with Ferguson, Andrews Investment Advisers, which is long Lowe's.

"They had every tailwind," Ferguson said. "I don't see how you could be excited to buy it, unless you thought they could keep it up. That's not a leap I'm willing to make right now."

On a conference call, Lowe's officials tried to reassure investors that the good times are here to stay for the company. Employment is picking up, the housing market remains strong, and Americans continue to invest in their homes, said Bob Tillman, Lowe's CEO.

"Many signs point to continuing strength in the home-improvement industry," Tillman said.

But at least on Monday, investors weren't buying that line. Following Lowe's report, investors sold off the company's shares, sending its down $1.28, or 2.2%, to $57.35, in recent trading.

At least in the third quarter, Lowe's seemed to answer some of its skeptics. The company posted profits of $452 million, or 56 cents a share, on $7.92 billion in sales. In contrast, the company earned $339 million, or 43 cents a share, on revenue of $6.42 billion in the year-ago period.

Analysts polled by Thomson First Call had forecast earnings of 53 cents a share on revenue of $7.6 billion. At the end of last quarter, Lowe's officials projected the company would earn 50 cents to 51 cents a share on sales of about $7.4 billion to $7.5 billion.

The company's overall sales growth was boosted by strong results at the company's older stores. Lowe's same-store sales, which compare results at like outlets open for more than one year, grew by 12.4% in the quarter.

Lowe's overall sales also benefited from the company's ongoing expansion effort. The retail chain opened 36 net new stores in the quarter. The company now operates 103.7 million square feet of retail space, up 14.2% from the same period a year ago.

During the quarter, all of Lowe's geographical regions and all of its product categories posted sales gains on a same-store basis, company officials said.

But the company's bottom line was also helped by keeping the lid on costs. Its gross margin, which represents the difference between what consumers pay for its products and what it pays suppliers for them, increased 46 basis points as a percentage of sales to 31.1%.

The improvement in gross margin was helped by larger product markups, lower inventory costs and a reduction in shrink, or lost inventory, company officials said.

On the operating cost side, Lowe's marketing, general and administrative costs fell 9 basis points as a portion of sales. Lower payroll and occupancy costs as a portion of sales helped keep overall operating costs in check, company officials said. Such benefits outweighed rising costs in health care and increasing bonus expenses, officials said.

Although Lowe's officials emphasized that the company's strength in the quarter was part of longer-term trends, even they acknowledged that the company benefited from some extraordinary circumstances in the quarter. Warm weather in the quarter helped sales of the company's seasonal merchandise, such as outdoor power equipment, officials said. Meanwhile, the effects of Hurricane Isabel on the East Coast spurred sales of lumber and other products in those markets.

And while company officials said they expected to see continued strength, they did warn that the company may not meet analysts' fourth-quarter expectations. Lowe's now expects to earn between 48 cents and 49 cents a share in the holiday quarter on sales of about $7.2 billion.

That result would top last year's results of 40 cents a share on $6.12 billion in sales. But Wall Street had projected that Lowe's would earn 49 cents a share on sales of $7.2 billion.

The problem for Lowe's, like many other retailers, its stock has pretty healthy expectations built into it. The company's shares are trading for about 21.67 times its expected 2005 earnings, a multiple that is fairly pricey by retail standards.

At that price, the company's stock is hardly a bargain, said Ferguson. And while the company put together a great third quarter, it wasn't that long ago that Lowe's was struggling. In the third quarter last year, the company's same-stores sales growth was a more pedestrian 4.1%. And in the first quarter this year, the company's sales

fell short of analysts' expectations.

Lowe's earnings growth will likely slow in the first and second quarters next year as the company comes up against strong prior year profits, Ferguson said.

"Like any good manager, I get nervous when things are going great (for a company)," he said. "It's crystal clear (Lowe's) had a great quarter. As for the future, I don't know."