Lowe’s surges most in three years after profit tops estimates

Lowe’s Cos. surged the most in more than three years after fiscal third-quarter profit topped analysts’ estimates, helped by the recovering housing market and preparations for superstorm Sandy.

Lowe’s, the second-largest U.S. home-improvement retailer, advanced 7.5 percent to $34.38 at 9:52 a.m. in New York and earlier rose as much as 7.9 percent for the biggest intraday gain since May 2009. The shares had climbed 26 percent this year through Nov. 16.

Lowe’s, led by Chief Executive Officer Robert Niblock, boosted sales of generators, chainsaws and cleaning supplies in the northeastern U.S. before Sandy struck on Oct. 29, destroying homes and leaving millions without power. Consumers also spent more as accelerating home sales and construction showed the U.S. housing market is recovering.

“They got some benefit from having the week of the superstorm in their results,” John Tomlinson, an analyst at ITG Investment Research in New York, said today by telephone. His firm doesn’t rate shares. “The results were also driven by improvements in housing.”

Net income in the quarter ended Nov. 2 rose 76 percent to $396 million, or 35 cents a share, from $225 million, or 18 cents, a year earlier, the Mooresville, North Carolina-based company said today in a statement. Excluding some items, profit was 40 cents a share. Analysts projected 35 cents, the average of 15 estimates compiled by Bloomberg.

Sales rose 1.9 percent to $12.1 billion, topping analysts’ $11.9 billion average estimate.

Housing Recovery

New-home sales in September climbed 5.7 percent to a 389,000 annual pace, the most since April 2010, according to the Commerce Department. Housing starts that month jumped 15 percent to the fastest rate since July 2008, a report last month showed. Beginning construction rose to an 872,000 annual rate, exceeding all forecasts in a Bloomberg survey, Commerce Department figures showed.

The gains also have benefited Home Depot Inc. The largest U.S. home-improvement retailer last week said net income climbed 1.4 percent to $947 million. Profit excluding some items topped analysts’ estimates, and sales rose 4.6 percent.

Lowe’s gross margin, the portion of sales left after subtracting the cost of goods sold, widened to 34.3 percent from 34.1 percent a year earlier. Selling, general and administrative expenses declined 6.5 percent to $3.02 billion after the retailer cut more than 500 corporate jobs this year after closing 27 U.S. stores and canceling plans for new locations.

Executives said today on a conference call that Lowe’s is making progress on a shift to everyday low prices and trimming slow-selling merchandise. Better management of promotions also helped profitability, Chief Financial Officer Robert Hull said on the call.

(Lowe’s will hold a conference call for analysts at 9 a.m. New York time. Click LOW US <Equity> EVTS <GO> to listen.)

Bloomberg News

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