Caution in Home Depot Ahead of Earnings After Lowe’s (HD, LOW)

This morning the earnings report out of Lowe’s Companies Inc. (NYSE: LOW) has taken shares lower.  The housing materials and hardware giant saw a near-18% drop in earnings and its numbers came in at $0.41 EPS on $607 million in net income derived from nearly a 2% drop in revenues of $12.0 Billion.  First Call was at $0.40 EPS on $12.4 Billion.  Unfortunately, its same store sales numbers for the quarter were down 8.4%.  The company sees a 6% comparable decline in the quarter and year ahead.  Lowe’s guided fiscal Jan-2009 to $1.45 to $1.55 versus prior guidance of $1.50 to $1.58 EPS, while First Call had estimates of $1.54 EPS.

The Home Depot, Inc (NYSE: HD) shows its earnings tomorrow, and it’s going to be hard to expect much better results than we saw out of Lowe’s.  There will of course be some changes seen in the Home Depot estimates now that Lowe’s has shown its numbers.  But First Call had the following estimates on last look before Lowe’s reported:

• Q1-2009 $0.37 EPS on $17.6 Billion in revenues;
• Q2-2009 $0.66 EPS on $20.88 Billion in revenues;
• fiscal Jan-2009 $1.76 EPS on $72.68 Billion in revenues.

While Lowe’s is down after its forecasts for the rest of the year remained muted, it is really hard to imagine that anyone in their right mind would have believed that anything different was going to happen.  A recessionary climate, a credit crunch, and a crummy housing market are not things that just started last week.

Lowe’s shares are down 2.5% at $24.27; and the 52-week trading range is $19.94 to $33.19.   Home Depot shares are down 0.85% at $24.85; and its 52-week trading range is $23.77 to $41.19.

Jon C. Ogg
May 19, 2008

Jon Ogg produces and edits the "10 Stocks Under $10" newsletter and he does not own securities in the companies he covers.