Home Depot Punished, Lowe's Rewarded For Q1 Beats

On many occasions, stocks in a particular sector will follow a consistent earnings pattern. For example, there has been one disaster after another in the big-box retail sector this quarter and the issues have been punished in kind. Not only do issues get hit off their own reports, but continue to get hit when others report.

However, sometimes when issues in the same sector deliver similar numbers, the issues won't respond in unison. This is the case with way the Street is reacting to Q1 reports from Home Depot Inc HD and Lowe's Companies, Inc. LOW. Both company's delivered good numbers, but the issues have gone in opposite directions.

What truly accounts for this discrepancy is anyone's guess. Most likely, large players that base their long-term trading decisions on this fundamental information interpret each company's results in a different way.

Home Depot

On Tuesday, Home Depot delivered a Q1 EPS beat of $0.09 along with a modest revenue beat. The company also raised FY 2016 guidance from $6.23 to $6.27.

At first glance, one would think the issue would blast to new highs. It did briefly in pre-market trading, when it hit $140 briefly before sharply reversing course.

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By the open, it retreated to the $133 area and the brief rally off the opening bell came up well shy of Monday's close ($135.34), only reaching $134.49 before continuing lower. The ensuing decline took the issue all the way to $131.10 before rebounding to close at $132.

That appears to be the level of control in Wednesday's session as $132.06 currently stands as the high for the day. Monday's low was also breached, with $130.02 as the current low.

Lowe's

Lowe's came out with a stellar report, beating on EPS by $0.13 along with a revenue beat of $360 million compared to Home Depot's of $37 million. Perhaps the beat difference is accounting for contrasting trading action, but in the grand scheme of things may not be all that significant.

Lowe's responded to the report with over a $1 higher open and retreated only $0.14 before continuing its march higher. So far, it has surpassed its former all-time high made in November at $78.13, reaching $78.98 and pausing ahead of the institutional sellers at the $79 level. Meanwhile, Home Depot is attempting to stay green for the day.

Before the reports, both issues were flat for the year. Another factor to keep in mind is that Lowe's may be playing some catch-up to Home Depot as it rallied 25 percent in 2015, while Lowe's was less than half of that at 10 percent.