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Lowe’s Quarterly Profit Trails Estimates as Home Depot Gains

Shoppers Walk Through Lowe's Cos. Store in Renton
Lowe’s and Home Depot have benefited from the one-and-a-half year climb in the U.S. housing market that has given homeowners confidence to renovate kitchens and bathrooms. Photographer: Mike kane/Bloomberg

Nov. 20 (Bloomberg) -- Lowe’s Cos., the second-largest U.S. home-improvement retailer, posted third-quarter profit that trailed analysts’ estimates as it works to match Home Depot Inc.’s growth in an improving housing market. Lowe’s stock fell.

Earnings for the three-month period ended Nov. 1 were 47 cents a share, Mooresville, North Carolina-based Lowe’s said today in a statement. Analysts had estimated 48 cents on average. Net income in the quarter advanced 26 percent to $499 million.

Chief Executive Officer Robert Niblock has trimmed slow-selling products from Lowe’s inventory and negotiated lower prices with vendors to catch up to larger Home Depot, which yesterday posted profit and sales that topped analysts’ projections. Lowe’s said sales at stores open at least a year climbed 6.2 percent in the quarter trailing the 7.4 percent gain Home Depot reported.

“Home Depot is better-positioned to benefit from the ongoing improvements in housing,” Alan Rifkin, an analyst at Barclays Plc in New York, wrote in a note before the results were released. Lowe’s “slightly disadvantaged real estate portfolio coupled with its less robust merchandising capabilities has the potential to drive future underperformance.”

Rifkin rates Lowe’s equal weight, the equivalent of a hold.

Lowe’s third-quarter revenue rose 7.3 percent to $13 billion. The average of 20 estimates compiled by Bloomberg was for $12.7 billion. Annual profit will be $2.15 a share, up from a forecast in August of $2.10, the company said. Analysts had predicted $2.19 on average. Sales will rise about 6 percent, up from a prior prediction of 5 percent.

Home Depot

Lowe’s stock fell 6.2 percent to $47.33 at the close in New York. Home Depot slipped 0.8 percent to $79.75. Lowe’s has gained 33 percent this year, while Home Depot has added 29 percent.

Home Depot said yesterday that net income in the three months ended Nov. 3 rose 43 percent to $1.35 billion, or 95 cents a share, as revenue increased 7.4 percent to $19.5 billion. Analysts estimated profit of 90 cents a share on sales of $19.2 billion.

Profit per share in the fiscal year through January will be $3.72, Home Depot said. That was up from a previous forecast of $3.60 and higher than analysts’ average estimate of $3.70.

Lowe’s and Home Depot have benefited from the one-and-a-half year climb in the U.S. housing market that has given homeowners confidence to renovate kitchens and bathrooms. Prices for single-family homes climbed in 88 percent of U.S. cities in the third quarter as buyers competed for limited inventories that included fewer discounted foreclosures, according to a report from the National Association of Realtors.

The nationwide median price for an existing single-family home rose 12.5 percent in the third quarter from a year earlier to $207,300, the group said.

Lowe’s operated 1,831 home improvement and hardware stores in the U.S., Canada and Mexico as of Nov. 1, it said today.

To contact the reporter on this story: Kevin Orland in Chicago at korland@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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