Home Improvement Earnings War: Lowe's Versus Home Depot (HD, LOW)

This week will be an important earnings week for building supply and home improvement companies.  We’ll get to see earnings out of Lowe’s Co. (NYSE: LOW) and out of Home Depot (NYSE: HD).

Monday will kick off with earnings out of Lowe’s (NYSE: LOW) and First Call has estimates at $0.25 EPS and $10.63 Billion in revenues.  Estimates for next quarter are $0.41 EPS and $12.6 Billion in revenues, while fiscal January-2009 targets are $1.76 EPS on almost $51 Billion in revenues.

On Tuesday, we’ll see earnings out of Home Depot (NYSE: HD).  First Call has estimates at $0.43 EPS on $18.06 Billion in revenues.  Next quarter estimates are $0.44 EPS on $18.06 Billion, and fiscal January-2009 estimates are $2.12 EPS on $75.4 Billion in revenues.

We want to see which one of these ranks better in various categories.  Lowe’s was recently noted as one of Jim Cramer’s stocks to play in a turnaround.  We recently noted how Home Depot could actually end up one of the surprise winners of our companies we gave DJIA targets for.  These shares have just about equally performed over the last week, while Lowe’s is up more than 5% and Home Depot slightly down over the last 3-months.  Both stocks are down nearly 20% in the last 6-months, and the 30% drop in Lowe’s over the last year is actually a tad "less bad" than Home Depot.  For one year out, the forward P/E ratios are 13.1 for Home Depot and 13.4 for Lowe’s.  As far as consensus analyst average price targets, Home Depot has upside of more than 15% to the approximate $32.10 average price target and Lowe’s has upside of over 17% to the roughly $27.80 average price target.

If there was ever a stock duopoly, you are seeing one here.  The basic numbers are close on all accounts.  Lowe’s is still thought of as a cleaner and sleeker look, but Home Depot still has the size factor going for it.  There was a while that the gains and losses at one came partially at the expense of the other.   

Jon C. Ogg
February 23, 2008