Lowe's beat Wall Street's profit expectations, to one-up rival Home Depot

Lowe's (LOW) outperformed expectations in Q1, reporting a profit of $2.92 per share against an estimated $2.89, and comparable sales decline of 1.7%, better than the anticipated 2.1% drop, driving shares up 1.9% premarket; this contrasts with Home Depot's (HD) recent earnings miss and gross profit margin decline, though Lowe's acknowledged housing-market headwinds while reaffirming its full-year 2025 earnings guidance of $12.15-$12.40 per share.

Analysis

Lowe's Companies Inc. (LOW) reported first-quarter earnings that surpassed Wall Street expectations, delivering a profit of $2.92 per share against a FactSet consensus estimate of $2.89, despite a year-over-year decline from $3.06 per share. Revenue for the quarter fell to $20.93 billion from $21.4 billion, aligning with analyst projections. Notably, comparable sales decreased by 1.7%, a more favorable outcome than the anticipated 2.1% decline, driven by growth in online sales and its professional products business, which partially offset unfavorable weather impacts. This performance contrasts with that of its larger rival, Home Depot Inc. (HD), which recently missed profit estimates for the first time in five years and saw its gross profit margin slip to 33.8% from 34.1%. In contrast, Lowe's gross profit margin improved to 33.4% from 33.2%. Despite acknowledging housing-market headwinds and near-term economic uncertainty, Lowe's reaffirmed its full-year 2025 earnings guidance of $12.15 to $12.40 per share, bracketing the analyst consensus of $12.21. The positive results led to a 1.9% premarket stock increase for Lowe's, positioning it for a 2.5-month high, even as its stock has declined 6.3% year-to-date, underperforming Home Depot's 3.1% loss and the S&P 500's 1% gain.

Key Decisions for Investors

• Investors might consider Lowe's relative strength compared to Home Depot, given its earnings beat, better-than-expected comparable sales, and improved gross margin in a challenging environment.
• Maintain vigilance regarding the acknowledged housing market headwinds and economic uncertainty, as these factors could continue to pressure the home improvement sector despite Lowe's reaffirmed guidance.
• Monitor the performance of Lowe's online and professional segments, as these appear to be key drivers of resilience and potential future growth.
• Evaluate whether Lowe's year-to-date underperformance relative to the market and Home Depot, despite recent positive results, presents a valuation opportunity or reflects broader sector concerns that may persist.