Tool supplier Stanley Works (NYSE: SWK) remains optimistic about earnings into 2008, despite deterioration of the U.S. homebuilding market. Even in 4Q2007, when the domestic construction market softened like warm butter, Stanley Works managed to post more than respectable earnings. 4Q sales increased 15% to $1.2 billion. Diluted EPS increased 7% to $1.11, operating margins increased and free cash flow increased 89% from 4Q2006.

4Q2007 was a tough quarter in the U.S., as subprime mortgage losses ran into the billions, banks tightened credit, and construction slowed dramatically. Despite the meltdown in the U.S. market, Stanley posted double-digit sales increases in all its international markets, which helped to offset slower sales in the U.S. The story is the same for FY2007.

Overall, the company is in good shape with net sales up 12% to $4.5 billion, although only 2% of that growth is organic. More than half of the increase was due to acquisitions. FY2007 diluted EPS increased 15% to $4.00, and free cash flow increased by $99 million to $457 million. Despite forecasting an organic growth rate of 0-1%, CEO John Lundgren states that Stanley Works is well positioned to withstand a possible U.S. recession.

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A few months ago, I moved into a larger apartment and found that I would need to make numerous trips to the hardware store each week -- and sometimes twice on Saturdays. The list of projects I had in mind for my new pad was as long as a city block and I knew some choices needed to be made. The most important one: Should I go to Home Depot (NYSE: HD) or Lowe's (NYSE: LOW)?

I always go to Home Depot to get lumber or some screws for the toolbox, or to glance at the power tools that I always dream of finding a use for. I go to Lowe's to pick up a closet organizer or to look at the latest washer and dryers on sale. They're both big box home improvement stores, but each one has its own special place in the world.

When I first drive into the lot of the big orange beast, I always see construction crews hauling lumber and Sheetrock into their vans. I know these people didn't search online for what they needed here, mainly because the HD site only has 20% of their actual inventory online. If you want to know what's in Home Depot, you actually have to go to Home Depot. As I walk inside, I find this magical place where men can walk happily around sawdust filled floors, sans spouse, testing out power tools and talking shop with other men. Workers in bright orange aprons walk side-by-side with beeping forklifts that weave in and out of crowded isles, creating an atmosphere that would intimidate any novice do-it-yourselfer. This is the department store for DIY weekend warriors. This is home.

I certainly don't get the same feeling driving to Lowe's. Lowe's is more focused on the aesthetics of home improvement and the final product, compared to Home Depot, which I feel is more about tools and parts. I can search through the Lowe's website much easier than Home Depot's, and even place an order to pick-up whatever I need, which is always good for the novice fixer-upper. Walking into Lowe's, I see couples walking on perfectly swept floors down extra-bright, super-wide aisles. I walk past tons of appliances and machinery that call out to me: top-of-the-line refrigerators, washing machines, and lawn tractors; I walk past them in amazement. This is a place for the general public and the occasional fix-it-yourself team; and this place takes pride in targeting women in their stores -- officials directly aim for the female customer by placing shelves at the perfect height for the 5-foot-4-inch customer.