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Home Depot and Lowe's: Will There Be Momentum in 3Q17?

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Part 6
Home Depot and Lowe's: Will There Be Momentum in 3Q17? PART 6 OF 9

Lowe’s Outperformed Home Depot’s Earnings Growth in 2Q17

Lowe’s EPS growth

With EPS (earnings per share) growth of 14.6%, Lowe’s (LOW) outperformed Home Depot in 2Q17. During the quarter, Lowe’s posted an adjusted EPS of $1.68—compared to $1.37 in 2Q16. The EPS growth was driven by revenue growth, share repurchases, and net margin expansion.

Lowe&#8217;s Outperformed Home Depot&#8217;s Earnings Growth in 2Q17

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For the next four quarters, analysts expect Lowe’s to post EPS of $4.82, which represents growth of 11.1% year-over-year. The EPS growth is expected to be driven by revenue growth, net margin expansion, and share repurchases. We’ll discuss share repurchases more in the next part. After posting its 2Q17 earnings, Lowe’s management lowered its EPS guidance to $4.20–$4.30 from the earlier guidance of $4.30.

Home Depot’s EPS growth

Home Depot (HD) posted EPS of $2.25 in 2Q17—14.2% growth from $1.97 in 2Q16. The EPS growth was driven by revenue growth, net margin expansion, and share repurchases. Share repurchases reduce the number of shares outstanding and boost the company’s EPS.

For the next four quarters, analysts expect Home Depot to post EPS of $7.77—11.6% growth from $6.96 in the same four quarters the previous year. After strong 2Q17 earnings, the company’s management raised its 2017 EPS guidance from $7.15 to $7.29. The new guidance represents 13.0% growth from $6.45 in 2016.

Peer comparisons

During 2Q17, Williams-Sonoma (WSM) posted EPS growth of 5.2%, while Bed Bath & Beyond’s (BBBY) EPS fell 30.6%.

In the next part, we’ll discuss Home Depot and Lowe’s dividend policies.

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