width=332Home Depot Inc reported a better-than-expected quarterly profit and boosted its earnings forecast for the year after it saw strong demand for gardening products and energy-efficient appliances.

The news from the top U.S. home-improvement chain came a day after rival Lowe's Cos gave a disappointing profit forecast for the rest of the year, despite strong quarterly results.

Home Depot raised its forecast for net earnings from continuing operations to $1.88 a share from $1.79. Analysts were expecting $1.87 a share. Its shares rose O.4 percent in premarket trading.

Both chains had a strong spring selling season as many U.S. consumers spruced up lawns and gardens and sought to benefit from a federal stimulus for energy-efficient appliances.

Also more consumers are showing a renewed interest in investing in their homes after a long hiatus.

But Lowe's had dampened hopes for a robust U.S. economic recovery in the second half of 2010, calling it a year of transition for the home improvement industry and indicating investors will have to wait until 2011 for significant growth.

Sanford C. Bernstein analyst Colin McGranahan, who has a market perform on both stocks, said Home Depot's forecast was much better than Lowe's. Lowe's had given a lackluster second-quarter outlook and the mid-point of its full-year forecast was below his expectations.

McGranahan added that both stocks were already pricing in the recovery. UBS analyst William Truelove doubted the strength of the forecast.

The sales outlook ... appears to us as only reflecting the first-quarter performance, suggesting the outlook for the rest of the year remains unchanged, he said in an early note.

For the full year, Home Depot expects sales to increase about 3.5 percent, up from a prior view of a 2.5 percent rise.

Home Depot's net income rose to $725 million, or 43 cents a share, in the first quarter ended on May 2 from $514 million, or 30 cents a share, a year earlier.

Excluding items, the profit was 45 cents a share, beating the analysts' average forecast of 40 cents.

Sales rose 4.3 percent to $16.86 billion, exceeding Wall Street expectations of $16.37 billion. Same-store sales for the first quarter were up 4.8 percent, with sales at its U.S. stores open for at least a year up 3.3 percent

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn, Dave Zimmerman)