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My Ratings on Lowe's & Home Depot: Analyst

Lowe's posted a 30 percent drop in quarterly profit on Monday. But the home-improvement firm offered a fourth-quarter profit forecast that could beat Wall Street expectations, citing signs of improvement in some of the hardest-hit U.S. housing markets. Mitchell Kaiser, senior retail analyst at Piper Jaffray, shared his insight on Lowe's and top rival Home Depot.

“The third-quarter results were largely in-line,” Kaiser told CNBC.

“The commentary about the Western division showing a 500-basis-points sequential improvement from the second quarter is some sign of modest improvement. All categories are still comping negative, but also showing some improvement as well.”

“At some point, it becomes a mathematical equation. After you’re down 14 quarters of negative same-store sales comp, things are going to get better,” he added.

In the meantime, the company's rival Home Depot is slated to report earnings before the bell on Tuesday.

“Both Lowes and Home Depot will hit positive same-store sales comps in the second or third quarter of next year,” said Kaiser. “But given housing prices still down, they’re going to inch towards down. It’s the bigger ticket items that are under pressure.”

Kaiser has a “neutral” rating on both Lowe’s and Home Depot .

“Lowes has been an exceptional executor over a long period of time. Home Depot under [CEO] Frank Blake has done an exceptional job in turning the culture of that organization,” he said.

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Disclosures:

Piper Jaffray usually provides bids and offers for the securities of Lowe’s and Home Depot, and will, from time to time, buy and sell the securities of Lowe’s and Home Depot on a principal basis.

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