Lowe's (LOW, Financial) reported impressive fourth-quarter earnings, surpassing EPS and revenue expectations, similar to its competitor Home Depot (HD, Financial). The company experienced a positive shift in comparable sales, up 0.2%, after two years of declines, driven by a strong holiday season and momentum in the Pro business. Despite this, Lowe's issued conservative FY26 guidance, missing top and bottom-line forecasts, aligning with Home Depot's cautious approach.

• The Pro business recorded high-single-digit comparable growth for the second consecutive quarter, outperforming the consumer DIY segment. Growth was broad-based across Pro geographies, bolstered by an extensive product range and inventory depth. Roofing, siding, and decking categories showed strength, while kitchen and bath remodels lagged due to high-interest rates.
• Lowe's acknowledges the challenging home improvement market and the uncertainty around lower interest rates. However, the company is optimistic that record home equity levels will eventually drive demand for larger projects. Rising personal income and an aging housing supply also favor Lowe's growth prospects.
• While consumers are cautious about large, financed projects, spending on big-ticket items like appliances and patio furniture has increased. This shift resulted in a 1.5% rise in the average ticket, offsetting a 1.3% decline in transactions.
• Lowe's continues to manage costs effectively, reducing SG&A expenses by about 2% year-over-year to $3.8 billion in Q4. The company improved productivity through streamlined processes, including a new freight flow system.

Similar to Home Depot, Lowe's benefits from a gradual recovery in the home improvement sector, although high interest rates remain a challenge. Nonetheless, pent-up demand for larger projects and consumer adaptation to sustained higher rates may alleviate these obstacles over time.