Home improvement retailers climb

"We continue to value the home improvement retailers on a normalized earnings basis," Goldman Sachs analyst Matthew Fassler wrote in a research note published late Tuesday. "Competitive dynamics for home improvement retailers have been stable, with minimal threats from mass market entrants."

Still, Fassler said he was lowering earnings estimates because of "slightly lower" same-store sales expectations into 2009.

He lowered his 12-month price target on Home Depot by one dollar to $32. He also lowered his target on Lowe's to $26 from $27.

"Both of these still suggest good returns," he wrote.

Fassler, who has a "Buy" rating on Atlanta-based Home Depot, said he was lowering 2008 earnings per share to $1.65 from $1.70. He reduced the company's 2009 earnings per share to $1.70 from $1.85 and cut 2010 estimates to $2.12 per share from $2.36 per share.

For Mooresville, N.C.-based Lowe's, which has a "Neutral" rating, Fassler said he expects 2008 earnings per share of $1.42, down from $1.51. In 2009 he cut the company's forecast to $1.46 per share, down from $1.63, and reduced 2010 earnings to $1.72 from $1.87.

Analysts surveyed by Thomson Financial predicted Home Depot would earn $1.71 per share in 2008 and $1.82 in 2009 while Lowe's is expected to earn $1.50 in 2008 and $1.61 the following year.

Home Depot shares rose 91 cents, or 3.8 percent, to $24.86 in midday trading Thursday. The company's stock has a 52-week range of $20.76 to $39.50.

Lowe's shares climbed 36 cents to $21, after rising as much as $1.19, or 5.7 percent, to $21.83 earlier in the session. The stock has a 52-week range of $18.00 to $32.53.