Lowe’s enters its second-quarter earnings report at a challenging point for the U.S. home improvement market. The company is expected to report earnings of $4.22 per share, down from the year-ago period, on revenue of approximately $26.1 billion.

The broader housing environment remains a significant constraint. Although the U.S. housing market has shown signs of gradual improvement, affordability remains a major obstacle for consumers. High home prices and financing costs can discourage prospective buyers from entering the market and limit the amount existing homeowners are willing to spend on large renovation projects.

That environment has affected both Lowe’s and rival Home Depot, with the two stocks facing sustained pressure as investors wait for evidence of a stronger housing recovery.

Store Traffic Could Offer an Encouraging Signal

Despite the difficult backdrop, Lowe’s has some indicators working in its favor. The company has underperformed Home Depot since the two retailers reported their first-quarter results, but store-visit data from Placer.ai suggest Lowe’s traffic was slightly stronger than that of its larger rival during the second quarter.

That distinction could become important if the company demonstrates that customer activity is holding up better than expected despite weaker housing conditions.

The relatively low expectations surrounding the home improvement sector could also work in Lowe’s favor. When investor expectations are already subdued, even modest evidence of improving demand, resilient margins or stronger guidance can generate a meaningful change in market sentiment.

Valuation Could Give Lowe’s an Edge

Another potential advantage is valuation. Lowe’s shares are currently priced more cheaply than Home Depot, creating a lower starting point for investors seeking exposure to a potential recovery in home improvement spending.

Analyst sentiment also remains constructive despite the stock’s recent weakness. Approximately 70% of analysts tracked by FactSet have a Buy rating or equivalent recommendation on Lowe’s, while the average price target stands more than 20% above the current share price.

That gap suggests Wall Street continues to see potential for a recovery even though near-term earnings expectations remain cautious.

The upcoming report will therefore be less about whether Lowe’s can deliver spectacular growth and more about whether management can demonstrate resilience in a difficult consumer and housing environment. Investors will be watching revenue trends, customer traffic and the company’s outlook for evidence that demand is stabilizing. If Lowe’s can deliver results above the low bar currently set by the market, the earnings report could provide an opportunity to interrupt the stock’s summer decline and rebuild confidence in its longer-term recovery prospects.