Retail

Why Lowe's Is Expected to Grow Earnings Faster Than Home Depot

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An earnings battle of retail titans is about to take place as both Home Depot Inc. (NYSE: HD) and Lowe’s Companies Inc. (NYSE: LOW) are set to share quarterly results this week. Home Depot will report first, on Tuesday morning, followed by Lowe’s early Wednesday. Both are posting their fiscal fourth-quarter financial results.

Home Depot’s consensus estimates that call for $1.10 in earnings per share (EPS) on $20.39 billion in revenue. In the same period of the previous year, it posted EPS of $1.00 and revenue of $19.16 billion.

The spring gardening and home fix-up season mirrors for home improvement stores the December holiday season for most other retailers. To underline the importance of the spring season, Home Depot said earlier in February that it has begun hiring what eventually will be 6,000 seasonal employees at its 182 Canada stores to get the company through the spring selling season. The company announced recently that it plans to hire 80,000 associates for its U.S. stores.

Home Depot operates nearly 2,000 stores in the United States, so on average the company plans to hire about 40 permanent part-time and seasonal employees per store. But that’s an average, and some states and stores are not slated to gain any new employees, according to a map at the company’s website. The number of U.S. seasonal employees the company plans to hire is equal to its hiring last year.


The 6,000 added workers in Canada are up from 5,500 that the company hired last year. The company said it has scheduled more than 400 career events across Canada for people interested in working for the company. Home Depot employs about 28,000 associates in its Canadian stores.

So far in 2016 Home Depot has underperformed the markets, with the stock down 8% year to date. However, over the past 52 weeks the stock is up 12%.

Consensus estimates call for Lowe’s to post $0.59 in EPS on revenue of $13.07 billion. That would compare to $0.46 in EPS on $12.54 billion in revenue in the year-ago period.

After an on-again, off-again courtship, Lowe’s finally headed for the altar with Canada’s Rona. Lowe’s is paying about $2.3 billion in an all-cash transaction for all the common and preferred shares of Rona. That’s more than double Rona’s closing price on the Toronto Stock Exchange at the time.

In September of 2012, Lowe’s dropped a $1.8 billion hostile takeover of Rona. Rona had already rejected the offer as too low, and the company’s rejection had the support of the Quebec government, which sided with the Canadian retailer claiming that Rona was a strategic asset for the province. At the time Lowe’s offer amounted to a 41% premium over Rona’s share price.

In its most recent earnings report, Lowe’s said:

Delivering on its commitment to return excess cash to shareholders, the company repurchased $750 million of stock under its share repurchase program and paid $260 million in dividends in the third quarter. For the nine month period, the company repurchased $3.3 billion of stock under its share repurchase program and paid $700 million in dividends.

Year to date, Lowe’s has underperformed the markets, with the stock down 9.5%. Over the past 52 weeks, the numbers aren’t as bad and the stock is down only 3.8%.

Shares of Home Depot were trading up 1.5% at $123.50 on Monday, with a consensus analyst price target of $140.81 and a 52-week trading range of $92.17 to $135.47.

Lowe’s shares were up 1.1% to $69.29, within a 52-week range of $62.62 to $78.13. The consensus price target is $83.62.

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