Lowe's forecasts strong sales growth this year, shares soar

(Reuters) - Lowe's Cos Inc (NYSE: LOW) forecast 2017 sales ahead of analysts' estimates and reported better-than-expected quarterly comparable-store sales as trends in the housing market encouraged Americans to spruce up their homes or buy new ones.

Shares of the No. 2 U.S. home improvement retailer rose 9.1 percent to $81.15 in premarket trading on Wednesday.

Homebuilding in the United States jumped 11.3 percent in December as a firming economy and higher wages due to a tightening labor market boosted demand for housing.

"Lowe's has generated growth in its core, underlying business, and has done so at a pace that is well above the previous two quarters," GlobalData retail analyst Hakon Helgesen wrote in a client note.

Lowe's reported a better-than-expected 5.1 percent rise in comparable sales in the fourth quarter - a strong rise after posting sales of 2.7 percent in the third quarter and 2 percent in the second quarter.

"This (results) provides some comfort that the company is getting back on to a firmer growth trajectory."

Improvements in customer service, which include providing an enhanced level of advice for bigger projects, helped Lowe's attract and convert more DIY customers and first-time homeowners, Helgesen added.

Still, Lowe's same-store sales performance lags Home Depot Inc (NYSE: HD) in the past several quarters, mainly due to its focus on do-it-yourself (DIY) customers, who spend less on big-ticket items compared with professionals.

Home Depot, which gets about 40 percent of its revenue from professionals, reported a stronger-than-expected 5.8 percent rise in holiday-quarter comparable store last month.

In contrast, Mooresville, North Carolina-based Lowe's gets only a third of its total sales from professional customers.

Lowe's forecast 2017 sales to increase about 5 percent, which equates to $68.27 billion, beating the average analyst estimate of $64.60 billion, according to Thomson Reuters I/B/E/S.

The company also forecast its comparable-store sales to rise 3.5 percent in 2017.

Net sales rose 19.3 percent to $15.78 billion in the latest quarter, mainly helped by its acquisition of Canada-based Rona Inc in May last year. Analysts on average had expected $15.39 billion.

Excluding certain items, the company earned 86 cents per share. Analysts on average had expected 79 cents per share, according to Thomson Reuters I/B/E/S.

(Reporting by Gayathree Ganesan in Bengaluru; Editing by Sriraj Kalluvila and Martina D'couto)

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