No. 2 U.S. home improvement chain Lowe's Cos Inc gave a muted quarterly outlook despite posting stronger-than-expected results for the latest period, and its shares fell nearly 4 percent.

The company forecast earnings of 57 cents to 59 cents a share for its second quarter, which began on May 1. Analysts on average were expecting 62 cents, according to Thomson Reuters I/B/E/S.

While we are optimistic we will experience solid demand through the balance of the year, we view 2010 as a year of transition for our industry, Chief Executive Officer Robert Niblock said in a statement.

For the full year, Lowe's sees earnings of $1.37 to $1.47 a share, up from its prior outlook of $1.30 to $1.42. Analysts were expecting a full-year profit of $1.45.

In its seasonally strong first quarter, Lowe's saw robust demand for products like fertilizer, potting soil and tools as many Americans prepared to spruce up lawns and gardens.

Also, many homeowners who had put off home renovations in the U.S. economic downturn upgraded appliances to take advantage of a federal stimulus for energy-efficient goods and invested in homes they are likely to live in for a longer period of time.

Consumers are showing signs of reengagement in home improvement, including discretionary projects and purchases of bigger ticket products, which had taken a back seat during the worst of the economic downturn, Niblock said.

Home Depot Inc , the top U.S. home improvement chain, plans to release its quarterly results on Tuesday.

Net income at Lowe's rose to $489 million, or 34 cents a share, in the first quarter ended April 30 from $476 million, or 32 cents a share, a year earlier.

Analysts on average were expecting a profit of 31 cents a share, according to Thomson Reuters I/B/E/S.

Sales rose 4.7 percent to $12.39 billion, beating the average estimate of about $12.25 billion. Sales at stores open at least a year rose 2.4 percent.

Shares of Lowe's were down 3.7 percent at $25.11 in trading before the market opened.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn )