The weak U.S. housing market suppresses demand! Lowe's Companies, Inc. (LOW.US) reported mixed results for Q2 and lowered its full-year guidance, disappointing the market.

Lowe's Companies, Inc. (LOW.US) reported mixed results for the second quarter of fiscal year 2026 while also lowering its full year guidance, indicating that a persistently weak U.S. housing market is eroding the outlook for this home improvement retailer. On Wednesday, before the U.S. stock market opened, Lowe's Companies, Inc. shares briefly fell more than 3%, and were down 0.5% as of the time of writing. The earnings report showed that Lowe's Companies, Inc. had revenue of $25.96 billion in the second quarter, a year-over-year increase of 8.3%, though $150 million below the average analyst expectation; net profit stood at $2.399 billion, roughly unchanged from the same period last year; adjusted earnings per share were $4.40, exceeding the average analyst expectation by $0.18. Comparable sales grew by 0.2% in the second quarter, falling short of market expectations. The growth was primarily driven by strong performance in sales to professional contractors and home services, as well as an online sales increase of 15.7%. However, ongoing macroeconomic pressures have caused consumers to tighten their spending, putting pressure on its DIY business and offsetting some of the gains. Beyond the mixed results for the second quarter, Lowe's Companies, Inc.'s downward revision of its full-year performance guidance disappointed investors. The company now expects total sales for fiscal year 2026 to be $92 billion, below the average analyst estimate of $92.94 billion, and down from a prior range of $92 billion to $94 billion; comparable sales are expected to be flat, down from the prior expectation of flat to a 2% increase; the expected adjusted operating margin is 11.6%, unchanged from a prior forecast of 11.6% to 11.8%; and the expected adjusted earnings per share is $12.25, below the average analyst expectation of $12.45, which was previously estimated to be between $12.25 and $12.75. Lowe's Companies, Inc.'s results sharply contrast with those of its competitor Home Depot, Inc. (HD.US). Home Depot, Inc.'s earnings report released on Tuesday showed a 5.7% year-over-year sales increase to $47.86 billion, exceeding the average analyst expectation of $47.24 billion; same-store sales rose 1.7%, the highest growth rate since the end of 2022, significantly surpassing the average analyst expectation of 0.94%; adjusted earnings per share were $4.92, better than the average analyst expectation of $4.73. The company also reaffirmed its guidance for a 2.5% to 4.5% sales growth for fiscal year 2026, although it warned that consumer concerns about housing affordability, borrowing costs, and uncertainty remain, and the broader real estate market has yet to recover, leaving the outlook uncertain. Chief Financial Officer Richard McPhail stated that large home renovation projects remain "on hold." The U.S. housing market is currently troubled by high mortgage rates and home prices. According to data released on Tuesday by the National Association of Realtors (NAR), the index measuring home purchase contract signings fell by 2.3% to 71.2, the lowest level since January and the second lowest reading since 2001. Additionally, new home construction in the U.S. has slowed considerably, with single-family home starts dropping to their lowest level since 2022 in July. This data corroborates Lowe's Companies, Inc.'s downward revision of its performance guidance, as well as Home Depot, Inc.'s warnings about the uncertainty of the outlook.