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Stock Analyst Update

Home Depot Attractive Despite Weakness in Lowe's

If Home Depot's stock falls much further, it's time to jump in.

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What Happened?
Lowe's (LOW), the number-two home-improvement retailer behind Home Depot (HD), warned Friday that it will miss analysts' estimates for same-store sales growth during the quarter ended October 27, though it still expects to meet analysts' earnings estimates for the quarter. Lowe's cited a weak lumber market and the ongoing remerchandising of its Eagle Hardware stores for the sales shortfall. In early trading, the stock was selling around $40, or 40% below its 52-week high. Home Depot's shares fell more than 5% in sympathy.

What It Means for Investors
Long term, we think Home Depot's shares look more attractive than those of Lowe's, and as we've been saying for a while, investors should view any weakness in Home Depot's stock price as a buying opportunity.While we think Lowe's is a good company with a good management team, arch rival Home Depot is a great company with a great management team. Although falling lumber and building material prices will most likely have an impact on Home Depot's sales and earnings growth this quarter, the company's long-term position as the clear industry leader remains intact.

Mark Sellers does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.