No. 2 U.S. home improvement chain Lowe's Cos reported better-than-expected quarterly results and said sales would improve in 2010 as demand for remodeling projects picks up.

The company also said it would buy back up to $5 billion of its stock. Its shares rose nearly 2 percent in trading before the market opened, while larger rival Home Depot , which is due to report on Tuesday, was up nearly 1 percent.

Lowe's results suggest the worst of the economic cycle is likely behind us, Chief Executive Robert Niblock said in a statement.

Falling home prices and high unemployment continue to weigh on consumers, Niblock said. But improving sales trends, especially demand for bigger-ticket renovations, provide an encouraging sign that consumers are gaining the confidence to take on more discretionary projects, he added.

The company said it expected sales at stores open at least a year to range from a 2 percent decline to flat for the first quarter, which began on January 30, and to increase 1 percent to 3 percent this fiscal year.

Investors had been waiting for Lowe's and Home Depot to outline when sales will improve. Many expect Home Depot's results to outpace Lowe's as the company faces easier same-store sales comparisons and benefits from efforts to improve efficiency.

Wall Street Strategies analyst Brian Sozzi said Lowe's full-year sales and profit outlook suggest incremental improvements as the year unfolds.

But he noted that the first-quarter outlook could have been stronger, considering evidence that consumers are becoming more open to home remodeling projects and the housing market is picking up.

Lowe's profit rose to $205 million, or 14 cents a share, in the fourth quarter ended January 29 from $162 million, or 11 cents a share, a year earlier.

Analysts on average expected 12 cents a share, according to Thomson Reuters I/B/E/S.

Sales increased 2 percent to $10.17 billion, beating the average estimate of about $10.01 billion. Same-store sales fell 1.6 percent.

Lowe's shares rose 1.6 percent to $23.50 in premarket trading, while Home Depot was up 0.9 percent at $30.45.

(Reporting by Dhanya Skariachan; Editing by Derek Caney, Lisa Von Ahn and John Wallace)