Lowe's Companies Inc (NYSE: LOW) reported its second quarter earnings before the bell today, and the results were surprisingly positive. The company reported record net earnings of $1.02 billion for the quarter, a 9% increase over the same period last year. Revenues came in at $14.17 billion for the quarter, which was a little bit ahead of analysts expectations of $14.13 billion. The net earnings per share from Lowe's worked out to be 67 cents per share, 6 cents better than wall street expectations. 
What helped the company beat expectations in a difficult market for the home improvement industry? One of the large reasons for the increase in earnings was an impressive gross margin expansion year over year. CEO Robert Niblock said that the company continues to gain market share and will take advantage of opportunities provided in the current market.
Lowe's quarter was quite impressive given the terrible market conditions in the home improvement industry. The Home Depot Inc (NYSE: HD) last week reported results that were not nearly as impressive, raising questions about their business plans. It appears that in the current period, Lowe's has done a better job managing the conditions through margin expansion than many of its competitors. In fact, Lowe's dropped its cost of goods sold to 65.53% of sales as compared to 66.56% in the same period last year.
LOW has responded nicely to this earnings news so far today, with the stock currently trading up 5.7% despite the overall market decline today. The performance of the stock is likely due to a combination of impressive earnings and very low expectations.
Lowe's did lower their full year earnings projections to $1.97 to $2.01, from $1.99 to $2.03, so the news was not all good. Investors fully understood the challenging environment that Lowe's is currently operating in. The fact that the company has managed its costs well and is gaining market share despite same-store sales problems is proving to be plenty to please the street today.
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Tracked on: August 20, 2007 2:37 PM | Permalink to Trackback