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Why Lowe's Stock Rose 11% in August

By Demitri Kalogeropoulos – Updated Sep 4, 2020 at 8:12AM

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Sales growth is speeding up.

What happened

Lowe's (LOW -0.30%) shares outpaced a booming market in August by rising 11% compared to the S&P 500's 7% increase, according to data provided by S&P Global Market Intelligence.

That rally put the stock at a 40% return so far in 2020, compared to a 31% gain for rival Home Depot (HD 0.28%) and a 9% increase in the broader market.

A couple shops for appliances.

Image source: Getty Images.

So what

Investors celebrated Lowe's positive earnings report on Aug. 19, which paired record sales growth with soaring profitability. The chain benefited from near-ideal selling conditions in the industry as home sales jumped and consumers increasingly directed their spending toward home upgrades.

Lowe's even managed to outpace Home Depot in key metrics such as market share and profit margin gains. It grew sales at a faster pace for the second consecutive quarter in Q2.

Now what

Home Depot is likely to step up its game in the second half of 2020, and its long track record of industry-leading growth suggests Lowe's may have trouble maintaining its newfound momentum. Keep an eye on customer traffic volume at each company for signs of changing market share trends.

In any case, investors might still like this retailer due to its improving earnings strength and its rock-solid dividend payout.

Demitri Kalogeropoulos owns shares of Home Depot. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends Lowe's. The Motley Fool has a disclosure policy.

Stocks Mentioned

Lowe's Companies Stock Quote
Lowe's Companies
LOW
$214.84 (-0.30%) $0.64
Home Depot Stock Quote
Home Depot
HD
$327.99 (0.28%) $0.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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