Earnings Preview: Lowe's 2Q profit seen rising

Associated Press

NEW YORK (AP) — Home-improvement chain Lowe's Cos. is set to report its fiscal second-quarter earnings result before the market opens Monday, and analysts will be watching for evidence that shows shoppers spent more on their homes during the hot summer months.

WHAT TO WATCH FOR: Although it is still below healthy levels, the housing market has started to recover this year after languishing since the bust in 2006 and 2007. Home sales are higher than last year, and home prices are rising in many markets, partly because the supply of homes for sale has fallen.

Lowe's results will show if homeowners took on more home and garden projects during the summer. Investors also will be looking for an update on Lowe's pricing strategy, moving away from limited-time sales in favor of lowering prices permanently in some areas. The price cutting was largely finished late last year, and the company was working with vendors to lower costs.

Lowe's also made a takeover bid for Rona Inc., a Canadian home-improvement chain, but it was rejected. Lowe's has urged Rona's board to reconsider, so analysts are likely to question Mooresville, N.C.-based Lowe's about that.

The results will follow encouraging news about the overall home market from rival Home Depot. The country's biggest home-improvement retailer said Tuesday that strong cost controls and healthy sales of paint, bathroom accessories and kitchen installations helped lift its net income by 12 percent during the period.

The Atlanta-based company boosted its full-year outlook, citing its performance so far this year.

In a conference call with investors, Home Depot's Chairman and CEO Frank Blake noted that some of the strongest growth in the latest quarter came from the markets that were hit hardest in the downturn, such as California and Florida.

"These are encouraging signs of stabilization in the housing market," Blake said

WHY IT MATTERS: Strong sales would be a sign that consumers are willing and able to spend more. Consumer spending is closely watched because it accounts for 70 percent of economic activity.

WHAT'S EXPECTED: Analysts expect earnings of 70 cents per share on revenue of $14.44 billion, according to FactSet.

LAST YEAR'S QUARTER: Net income was 64 cents per share on revenue of $14.54 billion.