Shares of Home Depot, Lowe's slip after analyst lowered profit estimates for both companies, citing weaker-than-expected results at Lumber Liquidators, which lowered its full-year profit forecast after 7.1% drop in same-store sales

Cindy Allen

July 11, 2014 (Bloomberg LP) – Home Depot Inc. and Lowe’s Cos., the two largest U.S. home-improvement retailers, fell in New York trading after a Deutsche Bank AG analyst lowered his estimates for their profits based on weak results at rivals.

Home Depot, based in Atlanta, slid as much as 3.4 percent, and Mooresville, North Carolina-based Lowe’s dropped as much as 2.9 percent.

Second-quarter profit at Home Depot may be $1.44 a share while Lowe’s earnings per share may be $1.02, Michael Baker, an analyst for Deutsche Bank in New York, said today in a note. Both estimates are 1 cent a share less than he’d previously projected. He continues to recommend buying Lowe’s shares and maintained his hold rating on Home Depot.

The cuts are due to weaker-than-expected results at Toano, Virginia-based Lumber Liquidators Holdings Inc., which yesterday lowered its forecast for profit this year to as much as $3 a share, from as much as $3.60, after second-quarter same-store sales slid 7.1 percent. The shares plunged as much as 23 percent today.

Lumber Liquidators’ same-store sales have a 56 percent positive correlation to revenue by that measure at Home Depot since 2008 and a 57 percent correlation with Lowe’s, Baker said.

To contact the reporter on this story: Kevin Orland in Chicago at korland@bloomberg.net To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Kevin Orland, Niamh Ring

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