Why Lowe’s Stock Gained 11% in August

What happened

Shares of Lowe's (NYSE: LOW) outpaced the market last month as the stock gained 12% compared with a 2% decrease in the S&P 500, according to data provided by S&P Global Market Intelligence.

The rally put shareholders back ahead of the broader market so far in 2019, but behind chief rival Home Depot (NYSE: HD).

A couple at work painting a room.

Image source: Getty Images.

So what

August's increase was powered by surprisingly strong operating trends in the most recent quarter. Lowe's revealed late in the month that sales gains were steady when compared with the prior quarter despite major new challenges such as deflation in the price of lumber. Lowe's even managed to edge past Home Depot on this core growth metric for the second straight quarter.

Now what

The consumer discretionary stock still has plenty of ground to make up between itself and Home Depot, especially in areas like profitability. Yet new CEO Marvin Ellison, who worked as an executive for Home Depot a few years ago, appears to have momentum on his side. The retailer predicted steady sales growth trends and modestly higher profitability for 2019 while Home Depot lowered its outlook slightly on both scores. Assuming the year plays out that way, Lowe's will have made an encouraging first step in its rebound plan.

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Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool has the following options: long January 2021 $120 calls on Home Depot. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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