Lowe’s Beats the Quarter—But One Line in the Guidance Just Crushed the Stock

Lowe’s delivered a better-than-expected fourth quarter on the surface, but a softer-than-hoped outlook for fiscal 2026 overshadowed the beat and sent shares sharply lower. The stock is down roughly 13 points in early trading, breaking below key technical support levels, a stark contrast to the roughly 3% rally seen in Home Depot following its report. The divergence underscores that in today’s environment, guidance quality and margin confidence matter more than a backward-looking earnings beat.

For the fiscal fourth quarter, Lowe’s reported adjusted EPS of $1.98, ahead of consensus estimates of $1.94. Revenue came in at $20.58 billion, also topping expectations of $20.34 billion and rising from $18.55 billion a year ago. Comparable sales increased 1.3%, well above the 0.2% analysts were expecting, driven by continued strength in Pro customers, online sales, home services, and a solid holiday season. On a headline basis, diluted EPS was $1.78 versus $1.99 in the year-ago quarter, but that included $149 million in pre-tax acquisition-related expenses tied to Foundation Building Materials (FBM) and Artisan Design Group (ADG). Excluding those charges, adjusted EPS rose 2.6% year over year.

Despite those beats, investors focused squarely on forward guidance. For fiscal 2026, Lowe’s expects total sales of $92 billion to $94 billion, implying growth of approximately 7% to 9%. However, comparable sales are projected to be flat to up 2%, and adjusted EPS is guided to $12.25 to $12.75, below the $12.94 consensus estimate. GAAP EPS is seen at $11.75 to $12.25. In a market that is searching for signs of a housing thaw, that cautious tone was enough to trigger selling pressure.

Margins were another area of scrutiny. For fiscal 2026, Lowe’s guided to an operating margin of 11.2% to 11.4% and an adjusted operating margin of 11.6% to 11.8%. While not alarming, these levels sit below Home Depot’s margin profile and do not signal meaningful expansion. The company expects net interest expense of approximately $1.6 billion and an effective tax rate of 24.5%. Capex is planned at about $2.5 billion, reflecting continued investment but not a major acceleration in growth initiatives.

By comparison, Home Depot’s operating margin guidance of 12.4% to 12.6% (12.8% to 13.0% adjusted) and adjusted EPS growth of flat to up 4% from $14.69 gave investors greater comfort. Home Depot’s comps rose 0.4%, versus Lowe’s 1.3%, but the Street appeared more confident in HD’s ability to hold margins steady and leverage Pro strength. That confidence gap likely explains much of the stock reaction divergence.

Strategically, Lowe’s continues to lean heavily into the Pro customer. Management emphasized growth in Pro, online, and home services, and the company’s recent acquisitions of FBM ($8.8 billion) and ADG ($1.33 billion) are designed to deepen its professional contractor exposure. These moves mirror Home Depot’s acquisition-driven Pro push through SRS Distribution and GMS. However, Lowe’s still appears to be playing catch-up in Pro penetration and scale, and that perception may be weighing on valuation multiples relative to HD.

CEO Marvin Ellison acknowledged that the “housing macro remains pressured,” citing high borrowing costs and slower real estate turnover. The tone was pragmatic rather than optimistic. Unlike Home Depot, which framed demand as relatively stable beneath the surface and highlighted share gains, Lowe’s guidance implied a continuation of a sluggish environment without a clear inflection point.

On tariffs, while Lowe’s did not provide detailed commentary in the initial release, the broader industry backdrop remains uncertain. Home Depot noted it is still analyzing potential tariff impacts and highlighted diversified sourcing, with more than half of products sourced domestically and no single foreign country accounting for more than 10% of purchases. Lowe’s likely faces similar supply chain dynamics, but without explicit reassurance or quantified exposure, investors may remain cautious about potential margin pressure if new trade policies materialize.

Capital allocation remains disciplined. Lowe’s returned $673 million in dividends during the quarter and $2.6 billion for the fiscal year. That steady shareholder return profile provides some downside support but does not offset concerns about earnings trajectory and macro sensitivity.

From a growth standpoint, the primary difference between Lowe’s and Home Depot this week was narrative strength. Home Depot delivered a comps surprise, stable guidance, and margin reassurance in a “frozen” housing market, allowing investors to view the report as stabilization. Lowe’s, while beating on Q4 metrics, effectively confirmed that housing will remain lackluster, and its EPS guidance missed consensus. In a market that rewards signs of acceleration or at least stability, Lowe’s guidance felt more defensive than proactive.

Technically, the break below key support levels amplifies the fundamental disappointment. With shares having outperformed the S&P 500 year-to-date heading into the print, positioning may have been optimistic. The negative reaction suggests expectations were higher than headline estimates implied.

In sum, Lowe’s delivered a solid quarter operationally—beating on revenue, EPS, and comps—but its cautious full-year outlook and relatively modest margin profile contrasted unfavorably with Home Depot’s steadier tone. Until there is clearer evidence of housing recovery or stronger Pro-driven margin leverage, investors appear willing to reward HD’s perceived stability over Lowe’s incremental improvement.