Lowe's Improves, Shares Rising

Lowe's Companies Inc. (NYSE: LOW) reported third-quarter 2012 diluted earnings per share (EPS) of $0.35 and $12.1 billion in revenues before markets opened this morning. In the same period a year ago, the home improvement retailer reported EPS of $0.18 on revenue of $11.85 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.35 and $11.91 billion in revenue.

The company's results included impairment costs and other items that the company said reduced pre-tax EPS by $0.05.

The company's COO said:

We are keenly focused on improving our core business. Our level of execution is improving and we delivered solid results in the third quarter. I would like to thank our employees for their continued dedication and customer focus.

The company guided full-year adjusted EPS at $1.64, slightly below the consensus estimate of $1.66. Lowe's also noted that revenues are expected to rise 2%, even though the current fiscal year is one week shorter than the previous year. Same-store sales are expected to rise 1% year-over-year.

Same-store sales in the third quarter rose 1.8% and the company improved its gross margins from 34.06% a year ago to 34.32% this year. Net margin rose from 2.97% to 5.26%.

As with Home Depot Inc. (NYSE: HD), Lowe's got a boost at the end of the quarter as residents along the East Coast stocked up on lumber and generators while Hurricane Sandy approached. But Home Depot beat quarterly estimates and raised its guidance.

Eliminating certain items, Lowe's also beat estimates, but lowered its EPS forecast, as it did when it reported second-quarter earnings. The 52-week week fiscal year has some impact, of course, but at the end of the first quarter of this year, Lowe's forecast full-year EPS of $1.73 to $1.83, lower than initial estimates and the company has been dropping the forecast ever since. Even the rebuilding that will follow the devastation wrought by the hurricane does not prompt Lowe's to optimism.

Lowe's also dropped its bid to expand into Canada during the quarter, giving up on its proposed $1.8 billion acquisition of Rona.

Shares are up about 3.3% in premarket trading, at $33.02 in a 52-week range of $22.39 to $33.63. Thomson Reuters had a consensus analyst price target of around $33.00 before today's results were announced.

Paul Ausick


Filed under: 24/7 Wall St. Wire, Earnings, Housing, Retail Tagged: HD, LOW

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