Lowe's Predicts Earnings Shortfall

Blaming drought conditions in the mid-Atlantic, Southeastern and Western regions of the U.S., which hurt sales of its outdoor products, Lowe's Corp. said late Monday that earnings for the fiscal year will come in at the low end of or slightly below its $1.97-$2.01/share forecast.Analysts, on average, expected the company to earn $1.99/share for the year. "While part of the weakness is weather related, Lowe's cautious outlook on 2008 suggests underlying trends are weaker than the company expected against easy compares," said one analyst. The housing market has experienced a slowdown as a result of problems in the subprime credit market, which has impacted Lowe's and rival home-improvement retailer Home Depot. Lowe's cited the subprime crisis in August when it lowered its outlook from the $1.99-$2.03/share it had forecast in May. Looking past the current cycle, the company said it expects sales to rise 8-11% annually and EPS growth to average 12-15% annually over the next three years. Lowe's shares slid 6.2% to $28.65 AH following the warning. Home Depot shares lost 2.2% to $33.15.

Sources: Press release, Reuters
Commentary: Lowe's "Runs A Tighter Ship" Than Home Depot • Lowe's: Maybe It's Not The Shoppers, But Where They Shop
Stocks/ETFs to watch: LOW. Competitors: HD. ETFs: RTH, XRT, PMR
Earnings call transcript: Lowe's Companies Q2 2007

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