Investors have some excellent reasons to follow Lowe's (NYSE:LOW) upcoming earnings report. The home improvement specialist has been posting solid sales growth recently, with customer traffic and profitability on the mend following a tough 2018.

The chain has even managed to outpace industry leader Home Depot (NYSE:HD) with its last two reports, suggesting CEO Marvin Ellison might finally be closing the market share gap with his former employer.

With those big-picture trends in mind, let's look at the key metrics to watch when Lowe's announces results on Wednesday, Nov. 20.

A couple shopping for a new vanity.

Image source: Getty Images.

1. Higher traffic

The last two earnings reports were good news mainly because sales gains held steady while also surpassing Home Depot's, whose comparable store sales growth has decelerated to below 3%. Lowe's top line is being hurt by the same short-term challenges that affected its peer, including slumping lumber costs and volatile weather. But improvements that management has made to the shopping experience have helped the chain protect its growth rate while Home Depot's declined.

Home Depot reports its results one trading day before Lowe's, and so investors will compare the two retailers' growth rates for clues as to which is gaining market share. The industry leader has been on the winning side of that battle for years, but Lowe's shareholders are hoping for confirmation that the tide is turning.

2. Profit challenges

Lowe's has a diverse base of revenue streams, but lumber is a big enough part of its business that major price swings can affect its overall results. Last quarter, deflation in that single product pressured profitability and contributed to gross profit margin declining to 32% of sales from 33% a year ago. Home Depot's comparable metric dipped, too, but was stronger at 33% of sales.

Lowe's said back in August that earnings should continue holding up well despite pressures from lumber prices and tariff increases, and that optimism helps explain why most investors who follow the consumer stock are expecting profits to rise to $1.35 per share from $1.05 a year ago. Those short-term profitability pressures aren't as important as the company's broader pricing trends, which appear to be strengthening in 2019 after ticking lower for most of the last two years.

3. Comments on the industry

Ellison said in Lowe's second-quarter results that all the key ingredients are there for continued strong industry growth through the 2019 fiscal year. These include fundamental economic metrics like low unemployment and rising wages, but also include trends specific to the housing niche like home prices, demographics, and the average age of housing stock.

On Wednesday, Lowe's will have the chance to update that reading to reflect all the latest customer traffic and demand trends that executives are seeing across their 15 geographic regions around the country. Paired with Home Depot's comments the day before, that description should help investors judge whether it's a safe bet that these retailers will see their industry expand at a robust clip in 2020, just as it has for most of the past decade. There will also be hints about which company is entering the new year with stronger sales and profit growth momentum.