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Driven by resurgence in the U.S. housing market, Lowe’s Companies Inc. (LOW - Analyst Report) posted strong results for the second quarter of fiscal 2013, with earnings rising 37.5% year over year to 88 cents per share. Moreover, quarterly earnings surpassed the Zacks Consensus Estimate of 80 cents per share.

This Zacks Rank #3 (Hold) stock witnessed a 10.3% rise in total revenue to $15,711 million and handily beat the Zacks Consensus Estimate of $15,049 million. During the quarter, comparable-store sales registered a 9.6% rise on a consolidated basis.

The year-over-year top-line growth was primarily driven by the company’s better capitalization of the rebounding domestic housing market. During the quarter, Lowe’s witnessed solid performances across all product categories.

In dollar terms, gross profit rose 11.6% year over year to $5,397 million. Consequently, gross profit margin improved 42 basis points (bps) to 34.35% during the quarter, reflecting a decline in cost of sales as a percentage of revenues.

Other Financial Aspects

Lowe’s ended the quarter with cash and cash equivalents of $1,085 million, long-term debt (excluding current maturities) of $9,015 million, and shareholders’ equity of $13,062 million, reflecting a debt-to-capitalization ratio of 40.8%.

During the quarter, the company repurchased $1.0 billion worth of its common stock and distributed $174 million in dividends.

Fiscal 2013 Outlook

Buoyed by better-than-expected quarterly results, the company raised its outlook for fiscal 2013. Lowe’s now expects sales to rise by nearly 5% and comparable store sales by about 4.5%. Earlier, Lowe’s had anticipated sales and comparable store sales to increase 4% and 3.5%, respectively. Further, management raised its earnings expectation for fiscal 2013 to $2.10 per share from $2.05 forecasted earlier.

The company also raised its growth projection for earnings before interest and taxes (EBIT) as a percentage of sales or operating margins to 65 bps year over year in fiscal 2013 compared with 60 bps projected previously.

Moreover, the company reaffirmed its plan to open 10 new stores during fiscal 2013. As of Aug 2, 2013, the company operated 1,758 locations in the United States, Canada and Mexico.

Recent Development

Recently, Lowe’s announced that it has got the approval from the U.S. Bankruptcy Court to acquire most of Orchard Supply Hardware Stores Corporation’s assets. The acquisition will be a crucial move for the company as increasing square footage in the key California market will bring greater opportunities to improve its top line and profitability.

Lowe’s operates through 110 stores in California. However, its presence is significantly lesser than that of its competitor, The Home Depot, Inc. (HD - Analyst Report) and this could be the reason behind its lagging in performance. Orchard has 91 neighborhood hardware and garden stores, out of which Lowe’s will acquire 72 stores.

Other Stocks to Consider

Better performing stocks in the building product retail industry space include Lumber Liquidators Holdings, Inc. (LL - Snapshot Report), with a Zacks Rank #1 (Strong Buy) and Builders FirstSource, Inc. (BLDR - Snapshot Report), with a Zacks Rank #2 (Buy).

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