Fitch Rating, one of the nation’s leading credit rating services, has reassessed its outlook on Home Depot and Lowe’s following the retailers’ recent third-quarter earnings releases.
Home Depot received a boost to A- staus, maintaining its stable outlook, based on the Atlanta retailer’s operating momentum, strong cash flow and positive comp-store sales in seven of the past eight quarters.
Home Depot’s shares recently traded at $37.12. Its market capitalization is $57.16 billion
Lowe’s rating was downgraded two levels to BBB+ with a stable outlook. Fitch cited the North Carolina’s company’s soft operating results and its #2 position in the home-improvement industry. Fitch mentioned the housing market, unemployment and the slowly recovering remodeling market as headwinds facing both companies.
Lowe’s shares recently traded at $23.10. Its market capitalization is $29.11 billion.
Last week, Home Depot reported its fiscal third-quarter earnings rose 13% and third-quarter sales increased 2.9%. Lowe’s posted a 44.3% drop in net income and 2.3% rise in sales.
Fitch said it expects home improvement spending to increase 3% in 2011 and 4% in 2012, adding a gradual improvement in the economy could spur more home-improvement projects.
Standard & Poor's, another major rating service, has also upgraded Home Depot while lowering its rating on Lowe’s.