November 21, 2017 / 11:15 AM / 24 days ago

Lowe's beats on quarter but unchanged outlook pressures stock

(Reuters) - Lowe’s Cos Inc (LOW.N) on Tuesday beat quarterly estimates on higher demand for building materials after hurricanes in the United States but kept its full-year sales and profit outlook unchanged, sending its shares lower.

Investors were hoping for stronger hurricane-related sales and were also concerned that Lowe’s was not keeping pace and closing the gap with bigger rival Home Depot (HD.N), which reported bumper results last week.

“We would have hoped for a bit more of a closing of that gap in this quarter - didn’t quite get it... I think investors would like to see a bit more improvement in the next couple of quarters,” Mike Bailey​, ​director of research at FBB Capital Partners, a Lowe’s investor, said.

Lowe’s shares, which have risen 15 percent this year, were down 0.6 percent at $80.99, even after beating Wall Street earnings per share estimates by 3 cents.

“I know there was some impact on the stock price, I think there may be some focus with the analysts... with our earnings per share being a slight beat to their expectations for the quarter and not changing our guidance for the year,” Lowe’s Chief Executive Robert Niblock told Reuters.

The No. 2 U.S. home improvement chain cited unpredictable weather in the fourth quarter for its tepid outlook.

Lowe’s maintained its sales forecast for the fiscal year ending Feb. 2 to rise about 5 percent, comparable sales to grow 3.5 percent and earnings per share of $4.20-$4.30.

Gift cards are shown for sale inside a Lowe's retail store in Carlsbad, California, U.S., May 24, 2017. REUTERS/Mike Blake

Hurricane-related sales in the third quarter were about $200 million. Lowe’s expected this demand to continue in the fourth quarter and 2018.

The retailer earned $1.05 per share, beating estimates of $1.02, according to Thomson Reuters I/B/E/S.

    Net sales rose 6.6 percent and beat expectations of $16.59 billion.

    Niblock said comp sales growth of 5.7 percent, which beat estimates of 4.6 percent, was also helped by Lowe’s move to focus on professional contractors, a clientele with deeper pockets.

    Lowe’s has traditionally focused on do-it-yourself customers but is taking advantage of the prolonged housing recovery by offering more products and promotions geared toward those contractors.

    “We continue to build Pro (professional customer) awareness with targeted marketing as well as Pro exclusive offers to grow our share of wallet with existing Pros while also expanding our base of Pro customers,” COO Rick Damron said on a conference call.

    Lowe’s said Richard Maltsbarger, president of international business, would replace Damron, who retires on Feb. 3.

    Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Martina D'Couto

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