What’s Driving Home Depot and Lowe’s Stock Price?
Home improvement companies
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Home Depot’s stock performance
In 2Q17, Home Depot posted an adjusted EPS (earnings per share) of $2.25 on revenues of $28.1 billion. Analysts expected the company to post EPS of $2.22 on revenues of $27.8 billion. The better-than-expected 2Q17 earnings and expectation of an increase in sales from the recovery efforts after Hurricane Harvey and Hurricane Irma increased investors’ confidence. As a result, Home Depot’s stock price rose. As of September 26, 2017, Home Depot was trading at $161.26—a rise of 4.5% since the announcement of its 2Q17 earnings on August 16, 2017.
Lowe’s stock performance
Lowe’s posted an adjusted EPS of $1.57 on revenues of $19.50 billion. Analysts expected the company to post EPS of $1.61 on revenues of $19.53 billion. Despite posting lower-than-expected 2Q17 earnings, the company’s stock price rose due to the expectation of increased sales from the recovery efforts after the hurricanes. As of September 26, 2017, Lowe’s was trading at $79.29—a rise of 4.6% since the announcement of its 2Q17 earnings on August 23, 2017.
So far, 2017 has been a good year for home improvement companies. Since the beginning of 2017, Home Depot has returned 20.3%, while Lowe’s stock price has risen 11.5%. The announcement that Sears Holdings would start selling its Kenmore appliances through Amazon.com (AMZN) offset some of the companies’ higher stock prices. Investors fear that Amazon’s entry into the appliances sector could curb home improvement retailers’ pricing power and lower their profitability.
During the same period, Bed Bath & Beyond (BBBY) and Williams-Sonoma (WSM) have returned -43.6% and 3.3%, respectively. The S&P 500 Index (SPX) and the SPDR S&P Homebuilders ETF (XHB) have returned 11.5% and 15.2% YTD (year-to-date), respectively.
In the next part, we’ll discuss Home Depot and Lowe’s revenues in 2Q17.