Lowe’s Profit Climbs 27% After Sales Exceed Forecast

Lowe’s Cos., the second-largest U.S. home-improvement retailer, posted fourth-quarter profit that exceeded analysts’ estimates after better-than-forecast sales signaled a recovery in the housing market.

Net income rose 27 percent to $205 million, or 14 cents a share, from $162 million, or 11 cents, a year earlier, the Mooresville, North Carolina-based company said today in a statement. Analysts projected 12 cents, the average of estimates in a Bloomberg survey.

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Lowe’s said sales in stores open at least 13 months may advance as much as 3 percent this year after a 2.8 percent January increase in U.S. housing starts. Spending on “many bigger-ticket, project categories” is improving, the company said. Consumers had curbed remodeling and major purchases during the recession.

“With traffic now turning positive, the signs of better big-ticket trends should ultimately lead to upside to the company’s current guidance,” Chris Horvers, an analyst at JP Morgan Securities Inc. in New York, said in a note to investors. He rates Lowe’s “overweight.”

Comparable-store sales fell 1.6 percent in the quarter ended Jan. 29, beating Lowe’s prediction that they would decline at least 2 percent. They tumbled 6.7 percent for the year.

‘Still Uncertainty’

“Comp sales may be positive sometime this year,” Walter Todd, who helps manage $775 million of assets, including about 150,000 Lowe’s shares, at Greenwood Capital Associates, said today by telephone from Greenwood, South Carolina. “They are being conservative in their guidance and probably appropriately so because there’s still uncertainty about the economic recovery.”

Earnings in the first quarter may total 27 cents to 29 cents a share, the company forecast. Analysts projected 33 cents, on average. Full-year profit will range from $1.30 to $1.42, compared with analysts’ $1.37 average estimate.

Lowe’s climbed 59 cents to $23.72 at 9 a.m. New York time, before the start of regular U.S. trading. Before today, the shares had dropped 1.1 percent this year on the New York Stock Exchange.

Lowe’s said it plans to buy back as much as $5 billion in shares over the next three years under a new authorization by the board. The company spent $500 million to repurchase 21.9 million shares in the fourth quarter.

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