Lowe's Cos Inc 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 % to $81.15 in premarket trading on Wednesday.
Homebuilding in the United States jumped 11.3 % 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 % rise in comparable sales in the fourth quarter - a strong rise after posting sales of 2.7 % in the third quarter and 2 % 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 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 % of its revenue from professionals, reported a stronger-than-expected 5.8 % 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 %, 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 % in 2017.
Net sales rose 19.3 % 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.