Lowe’s Stock Inches Up After Strong Earnings, $8.8 Billion Acquisition

Lowe’s stock rallied in the wake of Home Depot’s earnings Tuesday. (Spencer Platt/Getty Images)

Lowe’s stock rose Wednesday after the home-improvement retailer delivered a “plethora” of good news, including an earnings beat, improved guidance, and an another acquisition of a construction supplier puts it on better footing to compete with Home Depot .

Lowe’s announced it would buy Foundation Building Materials for $8.8 billion in cash and expects the sale to close in the fourth quarter. Foundation Building distributes interior building products, such as drywall and insulation, that are used by professional contractors.

“This is transformational acquisition for LOW and a pivot in capital allocation strategy,” wrote Citi analyst Steven Zaccone in a note Wednesday.

Foundation Building is Lowe’s second high-profile acquisition of a contractor-facing business this year, signaling that Lowe’s is serious about bringing the fight to Home Depot, which has had an advantage in the lucrative pro business for years.

Home Depot is in the process of acquiring GMS, a competitor of FBM.

Earlier this year, Lowe’s paid $1.3 billion for Artisan Design Group, which helps contractors design, deliver, and install flooring, cabinets, and countertops.

“Our initial view is that Lowe’s is accelerating its push to better serve the Complex Pro in that $250B [total addressable market,” wrote Jonathan Matuszewski, an analyst at Jefferies.

With both ADG and FBM, he said, Lowe’s has a “leading interior solutions platform” in an attractive sector of the home improvement business.

Second-quarter earnings handily topped estimates; revenue came in higher, but the beat was by a hair. The company’s adjusted earnings came in at $4.33 a share on revenue of $24 billion, topping expectations of $4.24 a share on revenue of $23.9 billion, according to analysts polled by FactSet.

Same-store sales grew 1.1% from a year earlier, in line with expectations.

Lowe’s now sees full-year 2025 sales of $84.5 billion to $85.5 billion, up from $83.5 billion to $84.5 billion. It expects its same-store sales range to be flat to up by 1% year over year.

In premarket trading, the stock was up 3% to $264.29. By midmorning, shares slipped back to a gain of 0.6% to $257.79. The S&P 500 and the Dow industrials were off 0.7% and 0.2%, respectively.

Lowe’s gave investors more to celebrate than Home Depot, which reported its financials on Tuesday. Home Depot missed expectations on both earnings and sales—and reiterated guidance.

Still, Home Depot stock rose after the company’s report, mostly because of management’s reassurance that there was “consistent momentum” in home improvement. The language subtly conveys that home improvement trends aren’t booming, but they aren’t faltering, either—despite economic uncertainty.

And that was what investors wanted to hear. Markets have factored in the weakness across the home improvement sector, acknowledging the industry won’t improve until the housing market improves.

What investors are looking for now are signs that companies are ready to pounce at the slightest inflection. And Lowe’s acquisition announcement is a good sign the company is ready for that resurgence.

“We believe LOW is on its way to capture increasing home improvement demand as the category recovers,” wrote Michael Lasser, an analyst at UBS. “It’s acting aggressively and showing progress. Thus, the risk-reward remains skewed to the upside.”

Write to Sabrina Escobar at sabrina.escobar@barrons.com