Lowe’s (LOW) stock has risen about 10% as of 11:26 AM ET today. The company reported better-than-expected sales and earnings for the second quarter of fiscal 2019. The second quarter ended on August 2. Lowe’s sales grew 0.5% YoY (year-over-year) to $20.99 billion in the second quarter. Analysts expected sales of $20.94 billion. The company’s same-store sales grew 2.3%, which beat analysts’ forecast of 1.9%.

Why did Lowe’s stock rise?

Lowe’s cited strong demand in the spring season, holiday event execution, and the successful paint and professional customers business for its second-quarter performance.

Home Depot (HD) reported its second-quarter results on Tuesday. The company’s sales rose 1.2% to $30.8 billion in the second quarter. Home Depot’s same-store sales growth of 3% beat Lowe’s. However, Home Depot’s US same-store sales growth of 3.1% was slightly behind Lowe’s same-store sales growth of 3.2% in the US home improvement business.

Lowe’s said that it delivered same-store sales growth in 15 geographical regions in the US despite lower lumber prices and challenging weather conditions.

Second-quarter earnings

The company’s adjusted EPS of $2.15 in the second quarter was significantly ahead of analysts’ expectation of $2.01. Also, the adjusted EPS increased 3.9% YoY. The improved operating margin and a lower average share count due to share repurchases boosted the company’s second-quarter EPS. Home Depot’s adjusted EPS grew 3.9% to $3.17 in the second quarter.

Lowe’s second-quarter gross margin fell by about 85 basis points to 32.1%. However, the operating margin improved by more than 90 basis points to 11.3%.

Fiscal 2019 outlook

Lowe’s continues to expect sales growth of about 2% in fiscal 2019. Meanwhile, the company expects same-store sales growth of about 3%. Lowe’s expects the operating margin to expand by 310–340 basis points on a reported basis and 20–50 basis points on an adjusted basis in the current fiscal year. The company expects its fiscal 2019 adjusted EPS to be $5.45–$5.65.

Lowe’s is taking various initiatives to improve its profitability. According to the Wall Street Journal, the company eliminated thousands of jobs and outsourced them to reduce costs. Lowe’s has also been closing underperforming stores.

Home Depot revised its guidance due to lower lumber prices. The company expects sales growth of 2.3% in fiscal 2019 compared to its previous guidance of about 3.3%. Home Depot expects same-store sales growth of 4%—down from the previous outlook of 5% growth. The company reaffirmed its EPS guidance. Home Depot expects its fiscal 2019 EPS to grow about 3.1% to $10.03 in fiscal 2019.

As of Tuesday, Lowe’s stock has risen about 6.0% on a YTD basis. The stock lagged the 26.3% rise in Home Depot stock and the 15.7% rise in the S&P 500 Index. Today’s results show that Lowe’s is moving in the right direction under CEO Marvin Ellison’s leadership. In July 2018, Ellison joined Lowe’s after resigning as JCPenney’s CEO.

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