Technical Research on Lowe's and Home Depot: Where is the Home Improvement Heading this Year?

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22 Jan, 2013, 13:00 GMT

LONDON, January 22, 2013 /PRNewswire/ --

The retail sector has been one of the biggest victims of the ongoing economic crisis and specialty retail stores had to bear the brunt of the real estate bubble as well. However, along with the economy and housing, specialty home improvement stores are also looking to get back on track. StockCall has completed the first round of technical and charting analysis on Lowe's Companies Inc. (NYSE: LOW) and The Home Depot Inc. (NYSE: HD). These free reports are accessible at http://www.stockcall.com/signup

In the past one year, major home improvement retail store chains like The Home Depot Inc. and Lowe's Companies Inc. have not only provided good stock returns but are also boosting their operations as well. These stocks have definitely benefited from the fact that sale numbers for existing U.S. houses are now at a three-year high mark. Higher sales will lead to more demand for home improvement products. However, these stocks still need to be on a careful watch list as the overall sector is still on shaky ground. The complete report on Home Depot is available for free at http://www.StockCall.com/HD012213.pdf

Solid Performance from Lowe's

Lowe's Companies Inc.'s [Free Technical Report on LOW] [1] stock performed well lately. After a long bout of flat returns, it offered 40% return in the last 12 months. But the jury is still out as the stock was recently downgraded by Canaccord Genuity from Hold to Sell. The downgrade was mainly prompted by the company's relatively lackluster growth in comparison to its more established competitors like Home Depot. But the downgrade does not mean that Lowe's is not working towards setting the wrong right. The stock is a good buy as it provides an impressive dividend yield of about 2%.

Lowe's is scheduled to report its fourth quarter earnings on February 25th and if the previous quarter is any indication then the numbers are likely to be on the positive side. The company trounced the consensus estimates in the third quarter with higher revenue. It also grew its adjusted operating income while its gross margin improved as well. But some of the company's new initiatives have received flak from its collaborators and analysts alike. Lowe's seems to be becoming unmanageable with the introduction of new product mixes and store layouts.

Home Depot on a Roll

The previous quarter had been good for Home Depot as well; it grew its comparable sales by 4.2%, while Lowe's posted relatively lower figure at 1.8%, along with raising guidance for its full year comparables. Home Depot is on its way to consolidate its position in the sector. The company regularly outperforms its peers especially Lowe's when it comes to important metrics. However, the company has its own set of problems. It has come a long way since the ouster of Nardelli, but the company still has negative growth rate for its 5 years sale metrics. Home Depot is still in a good position to benefit from growth in consumer demand for home improvement products. It is also steadily increasing its operating profitability. Home Depot still needs to work on getting its efficiency back to pre-housing burst levels.

Home Depot has stable financial numbers and has the ability to withstand minor shocks. The company also has good stock buyback program in place as it bought more than $2.5 billion worth of its stock during 2012, offering good returns to its investors.

With improvements in the real estate front and the economy in general, investors are hoping that this formerly steady sector will go back to being a popular buy option for their portfolios.

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  1. Lowe's Companies Inc. Technical Analysis [ http://www.StockCall.com/LowesCompaniesInc012213.pdf ]

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