After Lowe’s Cos. reported its fourth-quarter earnings on Tuesday, with like-for-like sales dropping 6.2 per cent, one market analyst says these results are reflective of a high mortgage rate environment that may be causing homeowners to step back from home construction projects. 

Brian Nagel, equity research analyst at Oppenheimer, told BNN Bloomberg in a television interview on Tuesday that Lowe’s recent earning results were “lacklustre” at best, “reflecting a still difficult backdrop within the U.S. home improvement space.” 

Despite Lowe’s drop in sales, which were better than analysts anticipated, shares for the company rose less than one per cent at the market open on Tuesday in New York. 

“I think what this means is the market, at least right now, is looking through these near term (results), and towards some type of fundamental recovery for Lowe’s later this year or into 2025,” Nagel explained.

“I think that’s a bit optimistic. I’ve seen this before, and it doesn’t take much for the market to all of a sudden get a little more pessimistic and start to price stock’s more near term fundamentals,” he said. 

Nagel added that existing housing data doesn’t point towards a “meaningful uptick” in home improvement retail anytime soon. 

“There’s the hope that the U.S. Federal Reserve will start to lower rates soon. And if that happens you get a better housing market,” he said, adding that “it’s not going to happen right away.”

“I think we’ve got some time before we start seeing really substantial rate decreases,” Nagel said. 

Nagel said that the majority of Lowe’s business is based on the maintenance and enhancement of existing homes. 

“That’s really the biggest chunk of the business,” he said.