Lowe’s Shares Hammered by Weak Guidance (LOW, HD)

Lowe’s Companies Inc. (NYSE: LOW) reported first fiscal quarter results this morning that were better than the consensus estimate, but full-year EPS guidance did not meet the prior estimate and the stock is getting punished for that.

The tale is similar to competitor that told by Home Depot Inc. (NYSE: HD) last week. The first quarter of this year got a boost from the warmer weather, which moved some sales into the first quarter and saw sales soften toward the end. Lowe’s reported EPS of $0.43, a penny above the consensus estimate on revenue of $13.2 billion, which also beat the consensus estimate of $12.99 billion.

Where Lowe’s stumbled was in its full-year guidance for EPS of $1.73-$1.83, compared with a prior analysts’ estimate of $1.87. That lower estimate is due in part to a 52-week fiscal year compared with a 53-week year that ended in early February 2012. Lowe’s noted that the extra week added $514 million to revenues and $0.05 to EPS in the fourth quarter of fiscal year 2012.

Like Home Depot, Lowe’s is concerned about the overall US economy:

We continue to maintain a cautious view of the housing and macro demand environment, and are focused on what we can control.

The company plans to open 10 new stores in the 2013 fiscal year and to increase same-store sales by 1%-3%. Same-store sales in the first quarter rose by 2.6% worldwide and 2.7% in the US.

The cautious outlooks from Home Depot and Lowe’s stem from continuing low housing prices which could encourage more buyers than remodelers. A recent survey by the National Association of Home Builders indicates that remodeling projects are up, particularly for bathrooms and kitchens. A majority of those projects are not aimed at increasing a home’s resale value, but geared for upgraded amenities. For the home improvement stores, they have to wonder if these kinds of projects will continue to increase or if those sales, too, were front-loaded due to warm weather.

Lowe’s shares are down about -6% in pre-market trading this morning, at $26.76 in a 52-week range of $18.07-$32.29. Shares of Home Depot are also down about -1.6% at $46.31 in a 52-week range of $28.13-$52.88.

Paul Ausick