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Why Lowe’s Stock Gained 10% in July

By Demitri Kalogeropoulos – Updated Aug 6, 2020 at 8:54AM

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Investors are betting that sales growth materially accelerated in the second quarter.

What happened

The stock of Lowe's (LOW -0.02%) outperformed a booming market last month as shares gained 10% compared with a 5.5% increase in the S&P 500 in July, according to data provided by S&P Global Market Intelligence.

The boost added to a broader rally for owners of the home improvement retailer, with shares up 25% in 2020 versus a 22% increase for Home Depot (HD 1.51%) and a 2.2% rise in the wider market.

A couple paint a room together.

Image source: Getty Images.

So what

Neither retailer issued official operating updates last month, but investors pushed both stocks higher on hopes that sales growth has accelerated as consumers focused their spending more on projects around the house during the pandemic.

Shareholders saw the first hints of these gains in mid-May, when Lowe's reported sharply higher comparable-store sales and surging profits through April. At the time, executives suggested the positive momentum continued into the second quarter. Sherwin-Williams (NYSE: SHW) said in late July that it saw "unprecedented" DIY demand in its consumer paint sales in recent weeks. 

Now what

Lowe's Q2 report is set for Aug. 19 and should show higher demand for home upgrades. Key shareholder questions for that announcement include whether Lowe's outgrew Home Depot, which reveals its operating results a day earlier. Investors will be watching for any signs that these retailers' sales gains are tapering off, too, given that the U.S. has entered a sharp recession.

Demitri Kalogeropoulos owns shares of Home Depot and Sherwin-Williams. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends Lowe's and Sherwin-Williams and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Lowe's Stock Quote
$210.97 (-0.02%) $0.05
Home Depot Stock Quote
Home Depot
$326.38 (1.51%) $4.87

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