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Both Lowe's (NYSE:LOW) and Home Depot (NYSE:HD) report 4th quarter results next week with LOW reporting Monday, Feb. 25th, before the open, while Home Depot reports Tuesday, Feb. 26th, before the open.

The stocks have been on a good run, with LOW lagging for a while as HD had a great first 11 months to 2012, while LOW bounced around through early August and then finished the last 5 months of 2012 with a monster move.

Since LOW reports first, we'll detail their numbers, then follow with HD and then summarize the sector:

Lowe's:

Consensus analyst expectations for LOW is $0.23 in earnings per share (EPS) on $10.83 billion in revenue for expected year-over-year declines of 7% in revenues and 21% in EPS.

If full year estimates are met, EPS would have grown 4% and revenues 0% for fiscal 2013 (or calendar 2012) for the period ended Jan 2013.

For the October 2012 quarter, LOW reported revenues of +2%, on flat EPS growth, generated by +1.8% comp growth.

From its early August 2012 low under $25, LOW returned over 40% into the last day of the year trading, in just that short 5-month timeframe.

For full-year 2012, LOW returned 40% not including the dividend.

Home Depot:

Consensus is looking for $0.64 in EPS on $17.672 billion in revenues for expected year-over-year growth of 28% and 10%, respectively.

Last quarter HD grew revenues 5% and EPS 23% on comps of +4%.

For the full-year, if consensus is met for the 4th quarter, HD will have grown EPS 23% and revenues 5%.

For the full-year 2012, HD returned 47%, excluding the dividend.

Perspective: Both LOW and HD are beneficiaries of the reinvigorated housing market, as not just housing starts and permits but existing home sales have improved steadily the last year.

The bid difference between HD and LOW since the housing bottom has been the "comp" performance: without adding any new stores, HD has managed to generate substantially higher comps than LOW up until late in 2012 when the comp differential began to narrow. In fact HD with little-to-no new store growth has driven sizable productivity gains and improved HD's income statement dramatically with very little growth.

The big difference in valuation currently is substantial: LOW is trading at 9(x) cash-flow and 9(x) enterprise value (EV) to cash flow, while HD is trading at 15(x) cash-flow and 16(x) EV to cash-flow.

However, the primary reason for the valuation differential is thanks to growth: the fact is HD is growing, while LOW is not.

HD is expected to grow earnings 23%, 14% and 15% the next three fiscal years while LOW is projected to grow 4% in this fiscal year, but 20% and 21% the next two years. LOW has been working to re-engineer its merchandising initiatives and improve productivity so better top-line growth had better improve EPS growth.

If LOW could also improve its comp growth, the stock might continue to outperform.

Currently our internal model has a fair value on LOW of $38 per share, while Morningstar has a $34 fair value. We have a $73 fair value on HD while Morningstar carries a $59 fair value on HD.

Frankly, we like the DIY's (do-it-yourself home improvement companies) to play the rebound in housing, even better than the homebuilders, but we've been waiting for a pullback for some time.

Of prime importance but isn't talked about frequently is the hopeful return of the "big-ticket" comp. This is sales or tickets greater than $500 for LOW and greater than $900 for HD. Big ticket is starting to trend positively for both retailers but is still subdued.

We would buy LOW nearer to $30 (under $32) and already own HD and would buy Home Depot after the earnings report.

I'm actually slightly partial to LOW even though we only own HD here, given the free-cash-flow yield of 7% on LOW versus 5% on HD and the fact that most analysts are in love with HD here, vis-a-vis LOW.

Versus the homebuilders, HD and LOW offer you a cleaner income statement and balance sheet, cleaner cash-flow, better dividends, share repurchases, and both DIY's are buying back their stock in large quantities (i.e. not diluting their share base).

Technically both stocks are overbought and need a decent pullback.

Source: Lowe's And Home Depot Earnings Previews: Better Way To Play The Housing Rebound