Lowe's raised forecast falls short of analysts' estimates
(Reuters) - Lowe's Cos Inc's (LOW.N: Quote, Profile, Research, Stock Buzz) quarterly profit slightly missed Wall Street estimates, and the No. 2 home improvement chain did not raise its fiscal-year outlook as much as analysts had hoped, sending its shares lower.
Wednesday's news came the day after larger rival Home Depot Inc (HD.N: Quote, Profile, Research, Stock Buzz) posted strong quarterly results and raised its forecast for the year for the third time in three quarters.
The news highlights Lowe's struggles in catching up with the industry leader. The company was slower than Home Depot to cut costs during the U.S. housing downturn.
Some analysts also say Home Depot will continue to outperform Lowe's on the sales front for a while, in part because it derives much more revenue from the key contractor and professional customer group.
These customers account for 35 percent of Home Depot's sales, compared with 25 percent at Lowe's. Some analysts say it is hard to close that gap quickly because Home Depot has more stores than Lowe's in major metropolitan areas, where many of the professional contractors are based.
For the fiscal year ending on January 31, Lowe's expects earnings of about $2.15 a share, up from its prior forecast of $2.10. However, the new outlook fell short of the analysts' average estimate of $2.19, according to Thomson Reuters I/B/E/S.
Net earnings rose to $499 million, or 47 cents a share, in the third quarter ended on November 1 from $396 million, or 35 cents a share, a year earlier. Analysts were expecting 48 cents a share.
Sales rose 7.3 percent to $12.96 billion, topping the analysts' average estimate of $12.72 billion.
Rising home prices are prompting more U.S. homeowners to look at their houses as an investment rather than an expense. That in turn is encouraging them to take up more expensive remodeling projects that they had avoided during the years of the housing downturn.
"The home improvement industry is poised for persisting growth in the fourth quarter and further acceleration in 2014," Lowe's Chief Executive Officer Robert Niblock said in a statement on Wednesday.
Shares of Lowe's were down 2.9 percent at $48.99 in trading before the market opened.
(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)