US housing market weakens, dampening demand! Lowe's (LOW.US) Q2 results mixed; lowering full-year guidance disappoints the market

According to the Zhihui Finance APP, Lowe's (LOW.US) released mixed results for the second quarter of fiscal year 2026 and lowered its full-year guidance, signaling that the continued weakness in the US real estate market is eroding the outlook for this home renovation retailer. In pre-market trading on Wednesday, Lowe's shares briefly fell more than 3%, and were down 0.5% at the time of writing.

The financial report shows that Lowe's second-quarter revenue increased by 8.3% year-on-year to $25.96 billion, $150 million below the average analyst forecast; net profit was $2.399 billion, basically flat compared to the same period last year; adjusted earnings per share were $4.40, $0.18 above the average analyst forecast.

Comparable sales for the second quarter grew by 0.2%, missing market expectations. The growth was mainly driven by the strong performance of business targeting professional contractors and home service sales, as well as a 15.7% increase in online sales. However, persistent macroeconomic pressures have led consumers to tighten spending, placing pressure on the DIY segment and offsetting some of the growth.

Beyond the mixed second-quarter results, Lowe's further disappointed investors by lowering its full-year guidance. The company now expects total sales for fiscal year 2026 to be $92 billion, below the average analyst forecast of $92.94 billion and down from the previous guidance of $92-94 billion; it expects comparable sales to remain flat, previously expected to be flat to up 2%; expects an adjusted operating margin of 11.6%, previously expected at 11.6% to 11.8%; and expects adjusted earnings per share to be $12.25, below the average analyst forecast of $12.45, with previous guidance of $12.25 to $12.75.

Lowe's performance stands in stark contrast to its peer Home Depot (HD.US). Home Depot reported on Tuesday that second-quarter sales rose 5.7% year-on-year to $47.86 billion, beating the average analyst forecast of $47.24 billion; same-store sales grew by 1.7%, the highest rate since the end of 2022, far exceeding analyst expectations of 0.94%; adjusted earnings per share were $4.92, better than the analyst average of $4.73. The company also reaffirmed guidance that sales will grow by 2.5% to 4.5% in fiscal year 2026, although it warned that consumer concerns about housing affordability, borrowing costs, and uncertainty, along with the broader real estate market not yet recovering, mean the outlook remains uncertain. The company’s CFO Richard McPhail stated that large home renovation projects remain in a “frozen state.”

The US real estate market is currently troubled by soaring mortgage rates and high home prices. According to data released Tuesday by the National Association of Realtors (NAR), the index measuring home-purchase contracts fell 2.3% to 71.2, the lowest level since January and the second lowest reading since 2001. In addition, new home construction in the US has slowed sharply, with single-family housing starts in July dropping to their lowest since 2022. These figures echoed Lowe's downward guidance and Home Depot’s warnings of continued uncertainty for the outlook.