Lowe’s Earnings on Deck: Can It Match Home Depot’s Resilience?

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Lowe’s (NYSE: LOW) is set to report fiscal second-quarter earnings tomorrow morning before the market opens, and expectations are running high—though tinged with caution. Shares of the home improvement retailer have surged about 15% in the last month, outpacing both peer Home Depot (HD) and the broader market. That rally reflects optimism that the worst of the demand malaise is behind the sector, but also raises the bar for Lowe’s to deliver. With Home Depot surprising investors today—not with a beat, but with improved traffic trends and reaffirmed guidance—the market is now keenly focused on whether Lowe’s, with its heavier exposure to the do-it-yourself (DIY) segment, can replicate that resilience.

Analyst Expectations

Heading into the print, Wall Street’s consensus calls for Lowe’s to deliver Q2 comps of +1.4% and EPS of roughly $4.65, compared to $4.56 in the prior year. RBC Capital Markets has trimmed its comp estimate to +1.0% (down from +1.5%) based on transaction data and read-throughs from flooring category peers. RBC also models gross margin expansion of just 5 basis points to 33.5%—in line with Street expectations—as shrink improvement and productivity initiatives are offset by dilution from the recently announced Artisan Design Group (ADG) acquisition.

On the cost side, SG&A deleverage of around 10 basis points is expected, reflecting continued wage investments and healthcare inflation. RBC believes the low end of Lowe’s 2025 guidance (EPS of $12.15–$12.40, comps flat to +1%) is more likely, underscoring a cautious stance. Evercore ISI is even more downbeat, initiating a negative trading call ahead of the release. While Evercore expects guidance to remain intact, analysts argue the stock’s recent run has gotten ahead of fundamentals, particularly as Lowe’s customer mix skews DIY, a segment that has shown more fragility than Home Depot’s Pro-heavy business.

The Home Depot Read-Through

Home Depot’s report this morning was a reminder that execution and narrative matter as much as the headline numbers. The company posted its first miss on both sales and EPS in a decade, with comps up just 1% against consensus of +1.3%, and EPS of $4.68 falling short of expectations. Yet, shares rallied 3% as management highlighted a cadence of improvement throughout the quarter—comps were up 0.3% in May, 0.5% in June, and an encouraging 3.3% in July, the best month of the year. More importantly, Home Depot reaffirmed its full-year outlook, emphasizing confidence in trends stabilizing into the back half of the year.

For Lowe’s, the concern is whether it can offer a similarly constructive message. Its exposure to DIY categories, especially big-ticket discretionary purchases, remains a sore spot. While Home Depot can point to Pro demand and traffic gains, Lowe’s will need to highlight stabilization in DIY to convince investors that momentum is building.

Review of Last Quarter

In its most recent report, Lowe’s delivered Q1 EPS of $2.92 on sales of $20.9 billion, with comps down 1.7%. Gross margin came in at 33.4% of sales, up 19 basis points year-over-year, while operating margin was 11.9%. Management reiterated its fiscal 2025 outlook of $83.5–$84.5 billion in sales, flat to +1% comps, operating margin of 12.3%–12.4%, and EPS of $12.15–$12.40.

CEO Marvin Ellison acknowledged pressure in DIY discretionary demand but highlighted progress in Pro sales, technology investments, and customer satisfaction, citing a J.D. Power award for best home improvement retailer. Notably, Lowe’s also announced its $1.325 billion acquisition of Artisan Design Group, which expands its Pro offering into the interior finishes installation market, a $50 billion opportunity. CFO Brandon Sink emphasized the acquisition would be funded with cash on hand, but share repurchases would be paused.

Key Items to Watch

Comps and Traffic: Analysts want to see whether Lowe’s comps mirror the improving cadence Home Depot cited in July, or whether DIY demand remains sluggish.

Gross Margins: Productivity initiatives and shrink reduction are tailwinds, but incentive levels and integration costs from ADG could weigh.

Guidance: Investors are laser-focused on fiscal 2025 guidance. Any hint of trimming the EPS or comp outlook would be viewed negatively, given the stock’s run.

DIY vs. Pro Mix: Pro has been a relative bright spot. Updates on Lowe’s Pro Loyalty Program, along with ADG integration, will be critical in assessing Lowe’s ability to diversify beyond DIY.

Capital Allocation: With buybacks suspended, investors will scrutinize free cash flow deployment and balance sheet discipline.

Macro Commentary: Comments on consumer confidence, tariffs, and housing market dynamics (including mortgage rates) could shape broader sentiment across the sector.

The Bigger Picture

Sector-wide, the backdrop remains challenging. Stifel recently described Q2 as a period of “extended malaise” rather than outright deterioration, while reiterating a preference for Home Depot over Lowe’s given its lead in complex Pro projects. That said, both companies are seen as well-positioned to capitalize on an eventual housing recovery, with the timing framed as “when, not if.”

Mortgage rates remain elevated, but easing expectations for Fed cuts have pulled 30-year rates back to around 6.6%, offering some relief to affordability. July’s better-than-expected housing starts data also adds incremental optimism, suggesting demand for home improvement could stabilize.

Final Takeaway

Lowe’s heads into its earnings report tomorrow with a higher hurdle than Home Depot, thanks to recent stock outperformance and greater reliance on DIY customers. Analysts expect a modest comp gain, slightly pressured margins, and reaffirmed guidance at best. The market will be watching closely to see if management can deliver a narrative of stabilization akin to Home Depot’s, or if DIY weakness will temper investor enthusiasm.

The report will likely set the tone not just for Lowe’s but for sentiment across the home improvement sector. With ITB, the homebuilder ETF, threatening to break out, a strong showing from Lowe’s could add fuel to the fire. Conversely, a miss—or cautious commentary—could reinforce the view that, for now, Home Depot remains the steadier hand in navigating this extended period of housing market uncertainty.