As the stock market has shown weakness to begin 2014, the only things that seem to be moving stocks higher are positive earnings reports. Lowe's (NYSE:LOW) hopes that this will be the case when it reports its fourth-quarter earnings on Feb. 26, as its stock sits more than 12% below its 52-week high. Let's take a look at the company's recent performance and the expectations for the upcoming report to determine if this is our opportunity to buy. 

The home improvement giant
Lowe's is the second-largest home improvement retailer in the world. The company currently operates 1,831 home improvement stores in the United States, Canada, and Mexico. Lowe's was founded in 1946 and it has grown into a Fortune 100 company that serves more than 15 million customers each week.

Source: Lowe's.

The most recent release
On Wednesday, Nov. 20, Lowe's released its third-quarter report for fiscal 2013, which was mixed in comparison with analysts' estimates. Here's an overview of the report:

Earnings per share $0.47 $0.48
Revenue $12.96 billion $12.72 billion

Lowe's earnings per share increased 34.3% and revenue rose 7.3% year over year, driven by comparable-store sales growth of 6.2%. Gross profit rose 8.2% to $4.48 billion, as gross margin expanded 23 basis points to 34.58%. Lowe's CEO, Robert Niblock, was very positive in the report, stating, "the home improvement industry is poised for persisting growth in the fourth quarter and further acceleration in 2014." Overall, Lowe's had a great quarter regardless of how it measured up to analyst expectations, and I believe Niblock's comments indicate that the momentum will carry over into the final quarter of the fiscal year.

Expectations and what to watch
Lowe's fourth-quarter results are due out before the market opens on Feb. 26 and the estimates call for solid growth. Here's an overview of the current expectations:

Earnings per share $0.32 $0.26
Revenue $11.77 billion $11.05 billion

These estimates would result in Lowe's earnings per share increasing 23.1% and revenue rising 6.5% year over year, although some analysts are becoming less bullish due to the cold weather. However, I believe that these statistics are attainable for Lowe's and the cold weather will not have had a major effect on earnings; I think consumer spending will see positive effects on the days leading up to the storms as consumers purchase generators and other products in preparation for them. Following the cold weather, consumers make purchases to repair storm damage, which will offset reduced store traffic during the intense weather. That said, one update will be just as important as earnings: guidance for fiscal 2014.

It will be crucial for Lowe's to provide an outlook for fiscal 2014 within analysts' estimates; current expectations call for earnings in the range of $2.38 to $2.83 per share on revenue of $55.2 billion to $58.6 billion. I believe Lowe's will guide within this range but at the lower end of it, since the company is often conservative in its guidance and seems to practice the "underpromise, overdeliver" method of forecasting. If earnings meet or exceed expectations and the company's outlook is within expectations, Lowe's stock will likely start a move back toward its 52-week high.

Indicator to watch
One of the most important indicators to watch during the lead-up to Lowe's earnings release will be Home Depot's (NYSE:HD) fourth-quarter report on Feb. 25. The report is due out before the market opens, so investors will have an entire trading day to read through it and determine the strength and condition of the industry. Here are the current consensus estimates:

Earnings per share $0.73 $0.67
Revenue $18.01 billion $18.25 billion

These expectations call for earnings to increase 9% and revenue to decline 1.3% year over year. This seems conservative, especially after Home Depot described the housing market as a "bright spot" in the economy and proceeded to raise its full-year forecast in the third quarter. For this reason, I am confident that Home Depot will meet or exceed the current earnings and revenue estimates. Investors should use Home Depot's report as a direct indicator of things to come for Lowe's and initiate or adjust positions accordingly.

The Foolish bottom line
Lowe's may not be the largest company in its industry, but it is still a force to be reckoned with. It is about to report fourth-quarter results and the current estimates look well within reach, but I think investors should wait to see what Home Depot's earnings report has to say before initiating any new positions. If Home Depot's report looks strong and Lowe's stock does not move higher with it, I believe that will result in the best buying opportunity.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.