Lowe's profit tops estimates as housing gains spur remodels
Lowe's Cos., the second-largest U.S. home-improvement retailer, posted third-quarter profit that topped analysts' estimates as the housing market's continued growth encouraged homeowners to spend on renovations.
Net income rose 17 percent to $585 million, or 59 cents a share, in the quarter ended Oct. 31, from $499 million, or 47 cents, a year earlier, the Mooresville, North Carolina-based retailer said today in a statement. The average of 25 analysts' estimates compiled by Bloomberg was 58 cents a share. Sales rose 5.6 percent to $13.7 billion, topping the average projection.
Chief Executive Officer Robert Niblock has taken advantage of years of rebounding home values by adding workers in stores to help customers with projects. Same-store sales, an important measure of performance because only established locations are counted, rose 5.1 percent in the quarter, topping the 4.1 percent average of estimates compiled by Consensus Metrix.
The company today raised its forecast for profit in the year through Jan. 30 to about $2.68 a share. Analysts estimated $2.63 a share, matching Lowe's previous projection. Same-store sales may rise 3.5 percent to 4 percent, up from an earlier forecast for a 3.5 percent gain.
The shares rose 2.3 percent to $59.90 at 6:23 a.m. in early trading in New York. They had gained 18 percent this year through yesterday, while larger rival Home Depot Inc. advanced 17 percent. That compares with an 11 percent advance for the Standard & Poor's 500 Index.
Home Depot declined yesterday in New York trading after the company reiterated its profit and sales forecasts for the year despite surpassing analysts' estimates on both measures last quarter.
Both Lowe's and Atlanta-based Home Depot view real-estate prices and sales of existing homes as key indicators for growth because rising values prompt consumers to spend more on their homes.
The median price for a single-family home in the U.S. rose 4.9 percent from a year earlier in the three months through September, according to a report from the National Association of Realtors. That came after gains of 4.4 percent in the second quarter and 8.3 percent in the first quarter. Price appreciation, however, is moderating as more properties are listed for sale and buyer demand slows, the group said.
The number of contracts to buy existing homes also rose less than forecast in September, signaling demand may plateau heading into the end of 2014. The pending home sales index increased 0.3 percent after dropping 1 percent in August, the group said last month. The median projection in a Bloomberg survey of economists called for a 1 percent gain.