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Lowe's Sets High Bar

Earnings shoot up before an accounting change as homeowners keep buying.
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Updated from 7:52 a.m. EDT


(LOW) - Get Lowe's Companies, Inc. Report

first-quarter earnings rose 8.1% from a year ago, as 22% revenue growth was muted on the bottom line by an accounting change. The results easily beat estimates and will be a tough act for

Home Depot

(HD) - Get Home Depot, Inc. Report

to follow when it reports its own earnings Tuesday.

Mooresville, N.C.-based Lowe's earned $455 million, or 57 cents a share, in the quarter ended April 30, compared with $421 million, or 53 cents a share, last year. Revenue jumped to $8.68 billion from $7.12 billion last year. Same-store sales rose 9.9% in the latest quarter compared with a year ago.

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Analysts were forecasting earnings of 54 cents a share on revenue of $8.51 billion.

Lowe's earnings were reduced in the most recent quarter by an accounting rule related to vendor payments by manufacturers. The company earned $581 million, or 73 cents a share, before the change, up about 38% from earnings in the year-ago quarter.

"Strength in every product category and across every geographic region drove solid earnings growth in the first quarter," Lowe's said in a release. "Continued strong sales in big-ticket categories such as outdoor power equipment and kitchen cabinets are an indication that consumers are not only willing, but are enthusiastic about investing in products and projects that maintain and enhance their greatest asset -- their home."

Lowe's shares were recently down $1.04, or 2%, to $49.56. The stock is down about 10% from the start of the year compared with a 4.2% decline in the

Dow Jones Industrial Average

and a 4.7% fall in shares of its main rival, Home Depot. Both shares rose by roughly half in 2003 compared with a 25% rise in the Dow.

For the current second quarter, Lowe's expects to earn 89 cents to 91 cents a share on a 19% jump in overall sales and a 6% to 7% jump in same-store sales. The sales increase comes out to a forecast of roughly $10.44 billion, based on year-ago sales of $8.77 billion. Analysts were forecasting earnings of 89 cents a share on sales of $10.22 billion in the quarter.

For full-year 2004, Lowe's expects to earn $2.69 a share to $2.72 a share on an 18% jump in overall sales and a 6% to 7% jump in same-store sales. The sales guidance comes out to about $36.39 billion. Analysts were forecasting earnings of $2.66 a share on revenue of $36.16 billion.

"Consumer focus on the home remains constant, and Lowe's remains uniquely positioned to satisfy that need and capitalize on the growth of the home improvement market," the company said.