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Home Depot Vs Lowe’s: Which firm will dominate lockdown home improvements?

Mohit Oberoi
Author: Mohit Oberoi
Last Updated: May 20, 2020

Brokers are divided over which of America’s rival home improvement chains — Lowe’s or Home Depot — will pull in most shoppers over the lockdown period.

Lowe’s seemingly made a strong claim by reporting its biggest rise in quarterly same-store sales in at least 15 years on Wednesday, as people spent more on tools and paint for do-it-yourself projects and home repairs during the coronanvirus lockdowns.

The chain’s same-store sales jumped 11.2%, while analysts were expecting only a 3.4% increase. The surge was the highest since at least April 2005, according to Refinitiv data. Net earnings rose 27.8% to $1.34bn, or $1.76 per share, in the first quarter ended 1 May.

The home improvement chain also handily beat quarterly profit estimates, a day after larger rival Home Depot’s first-quarter earnings disappointed.

Home Depot suspended its 2020 outlook and also reported earnings on Tuesday were worse than expected partly because of boosting worker benefits by $850m.

The retailer said that it reported earnings of $2.2bn, or $2.08 a share in the first quarter. That was down from a $2.5bn profit in the same period last year and below Wall Street’s consensus earnings forecast of $2.26 a share.

 

Batlle for the lockdown share of dollar

Home Depot lifted 0.2% at around $239on Wednesday morning, while Lowe’s is up around 1% at $118. However, Home Depot stock is up almost 9% year-to-date while Lowe’s is down just under 1%.

Nancy Tengler, chief investment officer at Laffer Tengler Investments expects Home Depot stock to continue outperforming Lowe’s.

“We own both but we own a lot more of Home Depot and the reason is twofold,” said Tengler on Monday on CNBC’s Trading Nation. “First of all, they’re best in class, they have the best locations, candidly the best management team, and they’ve been growing the dividend in the 20% range every year for the last five years.”

She also pointed to the company’s strong free cash flows and its online sales franchise which is roughly 20%. Consumers have preferred to buy more goods online due to coronavirus pandemic. Amazon stock recently surged to an all-time high. If you wish to trade in Amazon stock, we’ve reviewd a set of online stock brokers.

However, Ari Wald, head of technical analysis at Oppenheimer,  said, “We do prefer Home Depot stock. It not only has a stronger long-term trend, but we see it as the more tactical idea here.” Wald also said that the stock is finding support near its 200-day moving average, a key indicator among traders.

According to Wald, Home Depot stock is “currently trying to break out above its February peak of $247 so I think that’s very telling when you have a stock already getting close to new cycle highs with the rest of the market so well below those peaks. That’s really a great display of the relative strength in that stock.”

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Mohit Oberoi

Mohit Oberoi is a freelance finance writer based in India. he has completed his MBA with finance as majors and also holds a CFA charter. He has over 13 years of experience in financial markets. He has been writing extensively on global markets for the last six years and has written over 6,500 articles. He mainly covers metals, electric vehicles, asset managers, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.

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