Lowe’s Companies, Inc. (NYSE:LOW)’s second-quarter results were a mixed bag. The company beat expectations on earnings and gross margin, with EPS of $4.27 versus $4.22 expected. However, sales came in at $25.96 billion, below the roughly $26.16 billion estimate, while comparable sales rose just 0.2% against expectations of 0.8%. Lowe’s also cut its full-year comparable-sales outlook to flat growth from its previous range of 0% to 2%.

The encouraging part is that the weakness appears to be more about cautious consumers and the broader housing environment than a major execution problem at Lowe’s Companies, Inc. (NYSE:LOW). The company is seeing better momentum from professional customers, home services, and online sales, while homeowners continue to spend on necessary repairs even as they postpone larger remodeling projects.

Bull Case

The biggest positive from the quarter is that Lowe’s Companies, Inc. (NYSE:LOW) managed to beat earnings expectations even though sales missed. EPS came in at $4.27, ahead of the $4.22 consensus, while gross margin also exceeded expectations. That suggests the company is doing a reasonably good job managing costs and its merchandise mix in a difficult sales environment.

For investors, this matters because Lowe’s does not necessarily need strong revenue growth to keep generating solid earnings if it can maintain margins and operate efficiently. Consumers may be delaying expensive kitchen remodels, bathroom renovations, and other discretionary projects, but they still have to fix roofs, plumbing, appliances, and other parts of their homes.

That is giving Lowe’s a relatively defensive source of demand. The company benefited from continued repair-and-maintenance activity after winter, showing that customers are still willing to spend when something actually needs fixing. This could become even more important if consumers remain cautious for longer.

One of the more encouraging aspects of the quarter is Lowe’s continued momentum with professional customers. Pro customers generally make larger and more frequent purchases than DIY shoppers, so growing this business can improve the quality of Lowe’s revenue over time. Lowe’s Companies, Inc. (NYSE:LOW) has also been investing in its Pro offering, including its Foundation Building Materials acquisition, which is designed to expand its presence with professional customers.

If the company can keep gaining share with contractors and other professionals, it could offset some of the weakness among ordinary homeowners. This is probably the most important point for the longer-term bull case. Consumers are cautious about large home projects because of the broader housing and interest-rate environment. That does not necessarily mean Lowe’s is losing customers permanently.

As housing activity improves and consumers become more comfortable spending on renovations again, Lowe’s could see a meaningful recovery in discretionary home-improvement demand. D.A. Davidson’s Michael Baker similarly argued that the broader outlook is unlikely to change substantially until the housing market improves.

Lowe’s shares initially rose around 4% following the results, despite the sales miss and weaker guidance. That reaction suggests investors may already have been expecting a difficult quarter. In other words, the results were not strong across the board, but they also did not show a major deterioration in the underlying business.

Bear Case

The earnings beat should not distract from the fact that Lowe’s Companies, Inc. (NYSE:LOW) missed on revenue. Sales were $25.96 billion compared with expectations of $26.16 billion, while comparable sales increased only 0.2% versus the expected 0.8%. For a retailer, sustained sales growth is ultimately what drives earnings growth. Lowe’s can protect margins for a while, but it becomes harder to keep doing so if customer traffic and spending remain weak.

Lowe’s previously expected comparable sales to be flat to up 2% for the year. It now expects no comparable-sales growth. The company also moved its sales outlook to the bottom end of its previous range. This tells investors that management does not expect the demand environment to improve materially in the near term.

The bigger concern is that the downgrade comes after a quarter when Home Depot was able to beat expectations and maintain its full-year targets. That creates an uncomfortable comparison for Lowe’s. The professional customer business is helping, but Lowe’s still needs its large base of DIY shoppers to come back.

Homeowners appear to be prioritizing essential repairs over larger discretionary projects. That is good for near-term resilience, but it is not the same as a healthy remodeling market. If high borrowing costs and housing affordability pressures continue to discourage people from moving or renovating, Lowe’s could remain stuck in a low-growth environment.

The company said its outlook includes tariff refunds recognized during the quarter. That is worth watching because investors should distinguish between sustainable operational improvement and benefits coming from one-off or unusual items. If sales remain weak, Lowe’s Companies, Inc. (NYSE:LOW) will eventually need genuine productivity and market-share gains to support earnings rather than relying on favorable adjustments or refunds.

The timing of the reports makes Lowe’s results more difficult to assess in isolation. Home Depot beat quarterly expectations and maintained its full-year targets, which suggests that at least some parts of the home-improvement market are holding up better than expected.

That does not necessarily mean Lowe’s is losing share. But it does raise the question of whether Lowe’s is executing as strongly as its larger rival, particularly when DIY demand remains soft.

Conclusion

Lowe’s Companies, Inc. (NYSE:LOW) quarter was better on profitability than on sales. The company showed that it can defend margins, generate solid earnings, and benefit from resilient repair-and-maintenance demand even when consumers are hesitant to undertake major home projects. Its Pro business, home services and online operations also give it several avenues for growth.

The problem is that the top line is still struggling. Comparable sales of just 0.2% and the decision to reduce the full-year outlook to flat growth show that Lowe’s is unlikely to deliver a meaningful growth story until the housing and remodeling market improves.

So, the bull case is more about patience than immediate acceleration. Lowe’s Companies, Inc. (NYSE:LOW) appears to be well managed and is building stronger Pro capabilities, while today’s weak DIY environment could eventually reverse. The bear case is that investors may have to wait longer than expected for that recovery. If consumers continue postponing major projects and Home Depot performs better, Lowe’s could remain a relatively low-growth retailer despite its strong profitability.

Overall, it was a cautiously positive quarter rather than a breakout result. The business looks fundamentally healthy enough to weather the current slowdown, but the lack of sales growth and lower guidance mean the stock still needs a housing and remodeling recovery to unlock its bigger upside.

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Disclosure: None. This article is originally published at Insider Monkey.