Earnings Dump Lowe's Companies, Inc. (LOW) Stock Back to Second Place

Earnings Dump Lowe's Companies, Inc. (LOW) Stock Back to Second Place

Lowe's Cos. [s:LOW] on Wednesday reported earnings that missed expectations and guided lower, sending the stock down almost 6% in midday trading.

Lowe's sales and profit numbers would be a marvel were it a department store or apparel retailer.

In addition, Lowe's Q2 earnings report offered lowered full-year guidance for investors. Wall Street was expecting Lowe's to increase revenue by just 4.3%. Home Depot has been consistently outperforming Lowe's, in large part because of its strong pro business.

Revenue rose to $19.5 billion from $18.26 billion.

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One bright spot for the quarter was a 4.5 percent rise in same-store sales, an industry term that refers to sales at stores open for at least one year. Excluding the gain, adjusted earnings per share increased 14.6 percent to $1.57 from $1.37, prior year.

Expenses dropped, which lifted operating income to $2.4 billion, or 12.2% of sales, from $2.1 billion, or 11.2% of sales, a year ago. In intraday trading, the company's stock trended lower. Lower-than-expected profitability, in particular, may be an investor concern, as the company focused on the "necessary investments to improve the customer experience and drive sales", explained Lowe's CEO Robert Niblock in the company's second-quarter earnings release.

Still, management noted that results for the first half of the fiscal year didn't meet their expectations. That decision sets up a sharp contrast with Home Depot, which last week raised its comps target to 5.5% from 4.6%. "This includes amplifying our consumer messaging and incremental customer-facing hours in our stores, which will put pressure on our operating margin", he added.

Lowe's reported a profit of $1.57 a share, missing forecasts for $1.61 a share, on sales of $19.50 billion, below estimates for $19.53 billion.

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