Lowe's Companies, Inc. (LOW) shares rose more than 10% after the company reported better-than-expected second quarter financial results. Revenue rose 0.5% to $20.99 billion, beating consensus estimates by $30 million, and non-GAAP net income came in at $2.15 per share, beating consensus estimates by 15 cents per share. Same-store sales rose 2.3% compared to a 1.8% consensus, while U.S. home improvement revenue rose 3.2%.
Management attributed the growth to strong holiday event execution and growth in its Paint and Pro business units. In addition, the strong performance came despite lumber deflation and difficult weather. The company reaffirmed its fiscal 2019 outlook, citing a solid macroeconomic backdrop and continued momentum in executing its retail fundamentals framework. It also repurchased nearly $2 billion in stock and paid $382 million in dividends during the quarter.
The move higher by Lowe's and other retailers helped alleviate some investor concern about a slowdown in the overall market caused by the ongoing trade war with China.
From a technical standpoint, the stock broke out from prior highs of around $107.00 to briefly hit $110.00 before giving up some of those gains. The relative strength index (RSI) rose close to overbought levels with a reading of 66.97, but the moving average convergence divergence (MACD) experienced a bullish crossover that could signal a longer-term trend higher.
Traders should watch for some consolidation above prior reaction highs of around $107.00 before another move higher. If the stock breaks out higher, the next major resistance levels are prior highs of around $116.00. If the stock breaks down from those levels, traders could see a move toward support at $104.00, although that move appears less likely to occur.
The author holds no position in the stock(s) mentioned except through passively managed index funds.