The last three months of their respective fiscal years gave executives at The Home Depot and Lowe’s Cos. reason to believe that the economic downturn driven by a housing recession might finally be subsiding.

“The worse of the economic cycle is likely behind us,” said Lowe’s CEO and chairman Robert Niblock, after the North Carolina-based home improvement retailer reported a 26.5% increase in net income, to $205 million, for the quarter ended January 29, 2010. Lowe’s revenue for the quarter inched up 1.8% to $10.2 billion.

Even though its quarterly sales were off marginally to $14.6 billion, Atlanta-based Home Depot reported earnings of $342 million for the three months ended Jan. 31, 2010, compared to a net loss of $54 million for the same period a year ago. And where Lowe’s reported a full-year decline in its net income (see chart below), Depot enjoyed a nearly 18% gain in profit. In recent weeks, several Wall Street analysts have been touting Depot’s stock over Lowe’s, a stunning reversal from only a few years ago, when Depot’s financial ship was still listing and investors saw Lowe’s as the safer long-term bet.

“Despite the tough economic environment, we were able to make solid programs against our key initiatives in 2009,” said Depot’s CEO and chairman Frank Blake. He noted specifically that the company increased its overall market share by one percentage point; that its customer service ratings continued to rise; and that nearly two-thirds of its stores’ products are now being served by its Rapid Deployment Centers, massive distribution facilities through which the company is now managing more of its inventory.

The Home Depot projects that its sales in 2010 would increase by 2.5%, its comp-store performance would improve by the same percentage, and the company would open six new stores, after a period when it had put store expansion on hold. Lowe’s, on the other hand, expects to open between 40 and 45 new stores in 2010 (11 of them in the first quarter of the year). Its officials project that its 2010 sales would increase by between 4% and 6%.

During the fourth quarter, Lowe’s repurchased 21.9 million shares of its outstanding stock for $500 million. It has $1.7 billion of repurchase capacity left under a 2007 authorization by its board of directors, which in the last quarter authorized the repurchase of another $5 billion in stock, which the company expects to do over the next three years.

 John Caulfield is senior editor for BUILDER magazine

                                       Home Depot               Lowe’s

2009 Revenue                   $66.176 billion              $47.220 billion

% change from fiscal 2008  -7.2%                         -8.1%

Comp-store % chg.            -6.6%                          -6.7%

2009 Net Income               $2.661 billion                $1.783 billion

% chg. from fiscal 2008      17.7%                          -18.8%

Store count                       2,244                            1,710

Source: Company reports

Learn more about markets featured in this article: Atlanta, GA, Charlotte, NC.