Home Depot (NYSE:HD) is set to post its third-quarter earnings results before the market opens on Tuesday, Nov. 14. Investors are expecting good news in that announcement, given that the retailer hiked its sales and profit outlook at its last quarterly outing. Yet Home Depot faced stepped up competition from rival Lowe's (NYSE:LOW) that might have gotten in the way of its growth plans.

Let's look at the key trends to watch in next week's report.

An empty cart sitting in a home-improvement store aisle.

Image source: Getty Images.

Fighting over customers

The big takeaway from Home Depot's second-quarter announcement was accelerating customer traffic, which formed the basis for its surprisingly strong 6.3% jump in comparable-store sales. Lowe's, by contrast, improved sales by just 4.5%.

The gap between the two rivals is nothing new, but Lowe's is determined to close it -- and the company is prepared to sacrifice profits to achieve that goal. In fact, executives warned investors that its operating margin will dip as it rolls out initiatives aimed at filling its aisles with shoppers. "We believe this is the right strategy to more fully capitalize on strong traffic trends," CEO Robert Niblock said in a press release in late August.

We'll learn on Tuesday whether the changes hurt Home Depot's expansion pace or whether the industry leader continued building on the momentum that saw customer traffic growth improve to a 2.8% pace last quarter from 1.6% in the first quarter.

Keeping the profit train rolling

Home Depot's market-thumping sales growth is happening in concert with a big expansion in profitability. Just through the first half of the year, for example, operating income is up 9% to outpace the 6% sales increase. Net profits are up 10% and, thanks to aggressive spending on stock repurchases, earnings per share are up 15% to $3.91 per share from $3.40 per share in the prior-year period. The gains have added to a strong run for Home Depot's profitability and annual earnings, which have both more than doubled since hitting a low point in 2009.

LOW Operating Margin (TTM) Chart

LOW Operating Margin (TTM). Data by YCharts.

Executives are directing a lot of resources toward improving the supply chain and bulking up their e-commerce infrastructure, and so profitability might not rise as quickly in the back half of the year. Aggressive pricing moves by the competition, both in the physical and e-commerce channels, would impact that figure, too. Still, Home Depot's latest forecast calls for earnings to expand by about 13% in 2017, to $7.29 per share.

What inning are we in?

With the housing market expansion reaching into its seventh year, shareholders are naturally wondering when this cyclical industry will hit its next downturn. Home Depot can't know the answer to that question for certain, but executives do follow industry metrics such as the age of housing stock and the rate of home investment spending. These numbers imply plenty of growth left in the market, especially as the broader economy expands.

Home Depot executives were asked back in August whether they believed the industry was closer to the beginning or the end of its current expansion. Putting it in baseball terms, their best guess put the recovery at about the "sixth inning" when compared against the past peak reached in 2006. Home Depot will likely provide an encouraging update on that reading that incorporates the generally good economic news from the past few months.

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool has the following options: short January 2018 $170 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.