Will Home Depot be as cautious as Lowe's?

Updated: 7:02 p.m.

 

Many analysts and economists believe the U.S. recovery will be sharper and faster than expected.

 

Home-improvement retailer Lowe's (LOW) wasn't so sure today that the recovery will be robust before next year. Shares fell 3.1% to $25.26 this afternoon and weighed on U.S. stocks for most of the day.

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Results Tuesday from rival Home Depot (HD), Wal-Mart Stores (WMT) and Hewlett-Packard (HPQ), should help clarify the situation.

 

Lowe's said it expects to earn 57 to 59 cents per share in the second quarter, below analysts' expectations of 62 cents per share.

 

A big issue, CEO Robert Niblock said on today's analyst call, is that the housing market still hasn't bottomed.

 

The bottom in prices has "now been pushed out to the first half of 2011, as we’ve got to get through this glut of foreclosures that potentially need to move through the marketplace," he said.

 

Home sales are critical to companies like Lowe's because each sale generates thousands of dollar of spending by buyers to fix up a home.

 

The company also said its first-quarter profit rose to $489 million, or 34 cents per share, from $476 million, or 32 cents per share, a year earlier, topping Wall Street's estimate of 31 cents per share.

 

Sales rose 4.7% to $12.4 billion, and sales at stores open at least a year rose 2.4%.

Shares of Home Depot, Lowe's big rival, were up 1.1% to $35.59. Home Depot shares are up 23% this year, second among stocks in the Dow Jones Industrial Average ($INDU), after Boeing (BA). 

 

Analysts expect Home Depot to earn 40 cents a share in earnings, up from 35 cents a share a year ago. Revenue is expected to grow 1.2% to $16.37 billion.

 

Wal-Mart, meanwhile, is expected to report earnings of 84 cents a share for the fiscal first quarter, up 9% from a year ago. Revenue is projected at $97.8 billion, up 4.6% from a year.

 

Shares of the Dow component were up 1.2% today to $52.73. Wal-Mart shares are down 1.4% on the year.

 

After the close on Tuesday, Hewlett-Packard is expected to report a 22% increase in earnings per share for its fiscal second quarter to $1.05 a share.

 

Revenue is expected to increase 9% to $29.8 billion.

 

A big question is how the euro crisis is affect HP profits. HP gets 64% of its revenue outside the United States, although it doesn't break down non-U.S. by region. No country other than the United States generates more than 10% of sales, however.

 

HP shares were up 0.2% to $47.52 today and are down 7.8% for the year. The euro crisis has affected the stock, which is down 8.6% in May alone.

 

Elizabeth Strott contributed to this report.