Lowe's Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Lowe's (NYSE: LOW  ) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

The housing recovery has lifted prospects for home-improvement retailers, but Lowe's has languished in the shadow of its better-performing rival. Let's take an early look at what's been happening with Lowe's over the past quarter, and what we're likely to see in its quarterly report next Monday.

Stats on Lowe's

 

 

Analyst EPS Estimate

$0.23

Change From Year-Ago EPS

(21%)

Revenue Estimate

$10.83 billion

Change From Year-Ago Revenue

(6.9%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will Lowe's renovate its results this quarter?
Analysts have been cautiously optimistic about Lowe's over the past few months, boosting their consensus earnings-per-share estimates by a penny for the just-ended quarter, and by $0.02 for the full 2014 fiscal year. After tepid performance from Lowe's through much of 2012, investors have gotten on the bandwagon, with the shares up more than 12% since mid-November.

The main competition Lowe's has faced comes from Home Depot (NYSE: HD  ) , and Lowe's has had trouble standing up to its rival lately. Declining gross margins and much weaker growth from Lowe's has caused it to languish behind Home Depot, which managed to grow even before housing activity started picking up.

But specialty home-related retailers have also emerged from the wreckage of the housing market, and drawn away potential business from Lowe's. Trex's (NYSE: TREX  ) emphasis on deck and railing materials gives cash-strapped homeowners a manageable renovation project to add immediate value, and that has benefited the company as interest in home-related work increases. Meanwhile, flooring specialist Lumber Liquidators (NYSE: LL  ) has access to a range of materials that all-purpose home-improvement centers like Lowe's typically won't match.

In Lowe's quarterly report, be sure to watch for the impact that rebuilding efforts following Hurricane Sandy had on the quarter. But more importantly, investors need to hear from management with a strategy that can push Lowe's back into a leadership role in the home-improvement space, or else the stock could well languish again compared to its peers in 2013.

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