Home improvement giant Lowe's (NYSE:LOW) is on the docket for its first-quarter earnings release Monday. It may be too early to call a bottom to the housing slump sweeping the nation, but we'll soon know the extent to which industry woes are affecting trends at this do-it-yourself retailer. Read on for a rundown on expectations.

What analysts say:

  • Buy, sell, or waffle? Twenty-one analysts follow Lowe's. Twelve are bullish, one isn't, and eight are on the fence with hold ratings.
  • Revenues. Analysts on average expect $12.5 billion in first-quarter sales for year-over-year growth of 4.8%.
  • Earnings. Analysts project earnings at $0.50 per share, or a fall of 5.6% from last year's $0.53.

What management says:
Back when Lowe's announced fourth-quarter results in February, it also offered a first-quarter outlook. Management said it expected 15 new stores and expanding square footage by 11%, total sales growth of 5% to 6%, a same-store sales decrease of 2% to 4%, and diluted earnings of $0.49 to $0.51. Since February, there haven't been any developments or news to suggest anything has changed.

For the full year, Lowe's is calling for 150 to 160 new stores and 11% more in square footage, a total sales improvement of 10%, flat to 2% comps growth, and diluted earnings of $2.02 to $2.09. We'll see if there is any full-year change after first-quarter results are reported.  

What management does:
Quarterly margins have fluctuated considerably and fallen for the past three quarters. Annual trends are much better, as Lowe's has increased gross, operating, and net margins in each of the past five fiscal years. But that streak could end this year if challenges in the industry persist.





























All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
If Home Depot's (NYSE:HD) recent results are any indication, this is going to be a tough year for home improvement retailers. Fortunately, Lowe's isn't suffering from the same company-specific problems, what with Home Depot paying for years of underinvesting in its retail stores. Lowe's also has yet to fully blanket the country with its big-box stores, so it has a better opportunity to withstand industry weakness and keep total sales in positive territory.

However, a difficult housing market and subprime woes are lowering demand for new-home construction and hammering homebuilders such as Centex (NYSE:CTX), Hovnanian Enterprises (NYSE:HOV), MDC Holdings (NYSE:MDC), and Lennar (NYSE:LEN). This is also stifling home improvement projects and weekend trips to Lowe's. No wonder the stock price has been flat for 18 months.

Based on current guidance, Lowe's is trading at just less than 16 times forward earnings. That's definitely a reasonable multiple for an industry leader with the potential to grow. Problem is, there is quite a bit of near-term uncertainty as to whether housing trends have hit bottom or will deteriorate further before there are signs of stability. From a contrarian standpoint, short-term woes can spell long-term opportunity -- as long as the clouds eventually clear.     

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Fool contributor Ryan Fuhrmann is long shares of Lowe's and Home Depot but has no financial interest in any other company mentioned. The Fool has an ironclad disclosure policy. Feel free to email Ryan with feedback or to discuss any companies mentioned further.