Lowe's Earnings Benefit from Reborn Housing Market

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Mark Lennihan/AP
MOORESVILLE, N.C. -- Lowe's second-quarter net income rose 26 percent, buoyed by the housing market's ongoing recovery.

The second-largest home-improvement chain's results beat Wall Street expectations. It also raised its full-year earnings and revenue forecasts Wednesday. The strong performance comes a day after rival Home Depot's (HD) results also topped analyst estimates and it lifted its outlooks.

The housing market has continued to improve this year. On Friday, the Commerce Department said that builders began work on houses and apartments at a seasonally adjusted annual rate of 896,000 in July. That was up 6 percent from June, though below a recent peak of more than 1 million in March.

And on Thursday the National Association of Home Builders/Wells Fargo builder sentiment index reported that confidence among U.S. homebuilders is at its highest level in nearly eight years, fueled by optimism that demand for new homes will drive sales growth into next year.

Still, there are indications that rising mortgage rates may give potential buyers a reason to pause.

For the period ended Aug. 2, Lowe's (LOW) earned $941 million, or 88 cents a share. That's up from $747 million, or 64 cents a share, a year ago. Revenue increased 10 percent to $15.71 billion from $14.25 billion. Analysts surveyed by FactSet expected earnings of 79 cents a share on revenue of $15.07 billion.

Revenue at stores open at least a year climbed 9.6 percent. This metric is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.

Lowe's has revamped its pricing structure, offering what it says are permanent low prices on many items across the store instead of fleeting discounts. It has also focused on hiring more workers and improving its inventory.

Lowe's now anticipates fiscal 2013 earnings of about $2.10 a share, with revenue up approximately 5 percent. The company previously predicted earnings of about $2.05 a share, with revenue up approximately 4 percent. Based on 2012's revenue of $50.52 billion, the new outlook implies about $53 billion in revenue.

Wall Street expects earnings of $2.10 a share on revenue of $52.17 billion.

Lowe's announced Tuesday that its acquisition of Orchard Supply Hardware has received approval from the U.S. Bankruptcy Court in Delaware.

Orchard is a Sears (SHLD) spinoff that filed for bankruptcy in June. That same month the San Jose, Calif., company received an approximately $205 million offer from Lowe's for 72 of its stores. The "stalking horse" bid also included the assumption of payables owed to nearly all of Orchard's suppliers.

Lowe's expects to close on the buyout by month's end. Orchard will continue to run as a separate, standalone business. It will keep its brand name, as well as its San Jose headquarters. Lowe's Cos., based in Mooresville, N.C., had 1,758 stores in the U.S., Canada and Mexico at quarter's end.

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Could be the answer to many woes.

August 25 2013 at 1:44 PM Report abuse rate up rate down Reply

Housing market brings a lot of good things with it.

August 25 2013 at 1:03 PM Report abuse rate up rate down Reply

The management is doing a good job. Great CEO

August 25 2013 at 1:02 PM Report abuse rate up rate down Reply

Lowe's is doing good because we who work there are good. Some of you need to be a little more positive.

August 25 2013 at 12:58 PM Report abuse rate up rate down Reply

WHERE is the shame in the whitehouse.!!!!!!!!!!

August 21 2013 at 2:28 PM Report abuse rate up rate down Reply

...OFF THE MAIN SUBJECT,,,,,,,,,,,,,,,,,,,,,Where is Americas our rage of the killing of the WHITE BASEBALL PLAYER BY THE 3 BLACK YOUTHS.!!!!!!!!


August 21 2013 at 2:27 PM Report abuse rate up rate down Reply

All a government scam.........Who can afford to buy wood or anything at Lowes.....Prices of building materials.....SKY HIGH...,,,,,,,,,,,,And,,the new housing boom,,,,,bull crap....the government is investing more of mine and your tax money into it,,,,,FAKE REPORT.!!!!!!!! ...I guess AOL will again,,try to bring Walmart down.....Now,,,,Lowes is booming,!!!!!
GOVERMENT PROPAGANDA.~!!!!!!!!!!!!!!!!!!!!! I trush Russis better than our government,,,,,Sad to sad,,,but,,true.!!!!!
In only 5 short years,,,America has fallen from grace......I do not put all blame with current president,,,,,this has been in the works for years.!!!!!!!!!!!!!!

August 21 2013 at 9:49 AM Report abuse +3 rate up rate down Reply