Updated from 7:40 a.m. EDT

Home Depot ( HD) put up a first quarter that compares favorably with results reported Monday by its chief rival, and investors responded with rare enthusiasm for its beaten-down shares.

The Atlanta-based home improvement giant said first-quarter earnings rose to $907 million, or 39 cents a share, on sales of $15.10 billion, up from earnings of $856 million, or 36 cents a share, on earnings of $14.28 billion a year earlier. Analysts were expecting earnings of 37 cents a share on revenue of $15.05 billion.

The retailer cited new products, better overall inventory levels and a nationwide marketing program for the improvement. "Our store reinvestment strategy is delivering a cleaner, brighter shopping environment as we continued with our store resets and remodels," the company said.

Home Depot also reported a 1.6% drop in same-store sales, citing bad weather around the U.S. A similarly anemic comp reported Monday by Lowe's ( LOW) caused that company's shares to shed $4 to $40.30 on the New York Stock Exchange.

By contrast, shares of Home Depot were recently up $2.17, or 8%, to $30.23 on the Instinet premarket session. Their 52-week high is $49.50, while the low is $20.10.

Part of the relative strength could be chalked up to Home Depot's outlook: the company expects 2003 full-year earnings to rise 9% to 14% over last year's $1.56; analysts were forecasting $1.69. For sales, the company expects earnings to rise 9% to 14% over last year's $58.25 billion; analysts were expecting $63.52 billion.

Home Depot expects 2003 same-store sales to be flat to slightly positive for the year.

North Carolina-based Lowe's said Monday that first-quarter earnings rose to $421 million, or 53 cents a share, from $346 million, or 44 cents a share, as sales rose 11% to $7.2 billion. Analysts had been predicting earnings of 52 cents. Same-store sales rose 0.1%, below the company's 2% forecast.