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Lowe's stock jumped on Wednesday morning after the home improvement store posted second-quarter results higher than Wall Street forecasts and surpassed home-market competitor Home Depot on same-store sales growth in the United States.
The report – which exceeds analysts' estimates of earnings, revenue and store sales – shows that the changes brought by new CEO Marvin Ellison have begun to take root and attract more customers.
The company's shares jumped more than 12% in pre-market trading.
"Lowe's is lagging behind for years." Looking at this report quickly, it seems that, under Marvin's leadership, the new CEO, Lowe's is organizing really well, "said Brian Nagel, analyst of Oppenheimer, at CNBC. "Squawk Box" Wednesday morning. "And frankly, if we're right here and it continues, the stock has a long way to go."
Here's how the home improvement retailer has done, compared to what Wall Street was expecting, according to Refinitiv Consensus estimates:
- Adjusted earnings per share: 2.15 USD, compared to 2.01 USD estimated
- Turnover: $ 20.99 billion, up from $ 20.94 billion, according to estimates
- Same store sales: up 2.3% vs. 1.9% increase
"We have capitalized on spring demand, the strong execution of holiday events and the growth of paint and our professional business to generate solid results for the second quarter," Ellison said in announcing the results. "Despite the deflation of lumber and harsh weather conditions, we are pleased to have generated positive comparable sales in the 15 geographic regions of the United States."
The deflation in lumber prices also hit rival Home Depot, which posted higher-than-expected earnings Tuesday, but ran out of revenue and reduced its outlook for the year. Home Depot also said that tariffs on Chinese products should have an impact on the company's sales.
The company's earnings guidance for the year ended Jan. 31 remained the same, providing adjusted earnings per share of between $ 5.45 and $ 5.65.
Lowe's net income increased 10% to $ 1.68 billion or $ 2.14 per share in the quarter ended Aug. 2 from $ 1.52 billion, or $ 1.86 per share one year earlier. Excluding non-recurring items, Lowe's earned $ 2.15 per share, exceeding analysts' expectations by 14 cents.
Revenues in the second quarter rose slightly to $ 20.99 billion, exceeding Wall Street's expectations of $ 20.94 billion.
Sales at Lowe stores opened at least 12 months ago increased 2.3%, exceeding the expected increase of 1.9%. The company also reported that same-store sales in the United States were up 3.2%, up slightly from Home Depot's 3.1% increase in the United States.
Investors looked to see if Ellison, who took office in July 2018, could turn the company around. Earlier this month, Lowe announced plans to lay off thousands of workers. Last year, he announced the closing of stores to reduce costs. Among Ellison's new initiatives, there is also the creation of a technology hub in Charlotte, North Carolina, accommodating up to 2,000 workers.
The company said it has repurchased $ 1.96 billion of stock and paid $ 382 million in dividends in the second quarter.
Lowe's shares have risen nearly 6% since January, valuing the company at about $ 76.62 billion.
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