On Tuesday, Lowe's Companies Inc (NYSE: NYSE:LOW) received a reiterated Neutral rating with a steady price target of $240.00 from DA Davidson. This stance comes after the home improvement retailer reported a miss on comparable store sales estimates and provided downward guidance.
The company's earnings per share (EPS) exceeded expectations, attributed mainly to performance in areas other than sales, such as a gross margin beat and adjusted operating profit dollars that were slightly above the anticipated figures on lower sales.
The magnitude of Lowe's full-year guidance reduction mirrors a similar move by its competitor, Home Depot (NYSE:HD), excluding the accretion from SRS Distribution acquisition. The analyst noted this as an acceptable outcome, suggesting that the market had already adjusted its expectations following Home Depot's report last week.
Despite Lowe's reported results falling short of consensus, the implied performance for the second half of the year is not significantly different from adjusted market expectations.
The analyst's commentary highlights that while Lowe's did not meet the initially published comparable sales figures, the results were anticipated by the market due to similar trends observed in Home Depot's core business. The company's ability to surpass EPS estimates, albeit through non-sales related items, and the alignment of its guidance cut with Home Depot's, suggests a level of market acceptance for the performance.
The outlook for Lowe's stock appears to be cushioned by the broader momentum in the market, influenced by the recent Federal Reserve rate cut. The analyst implies that in the context of the current market environment and the company's performance relative to adjusted expectations, the stock may not suffer due to the reported miss in sales and guidance.
Lowe's shares continue to trade with the backdrop of the overall market sentiment, which has been recently buoyed by the Federal Reserve's decision to lower interest rates. The analyst's comments suggest that Lowe's, despite its guidance cut and sales miss, might still be positioned to maintain its stock performance in the near term.
In other recent news, Lowe's Companies Inc. has seen several developments. Jefferies financial analyst and Truist Securities have raised Lowe's price target to $274 and $269 respectively, maintaining a Buy rating. This increase is based on expectations of accelerated comparable sales and improved fixed cost leverage, as well as resilient margins and earnings. Despite a slight decline in second-quarter comparable sales, Lowe's better-than-expected margins and earnings per share led to these positive assessments.
Lowe's has revised its annual profit and sales expectations downward, anticipating a 3.5% to 4% decline in comparable sales, and an adjusted earnings per share forecast of approximately $11.70 to $11.90. This is due to a persistent slump in home improvement demand and a 5.1% drop in second-quarter comparable sales.
Citi maintained a neutral stance on Lowe's, following the company's second-quarter earnings report. This decision came after Lowe's earnings per share outperformed Wall Street's expectations, primarily due to higher gross margins and lower selling, general, and administrative expenses.
Telsey Advisory Group also maintained its Market Perform rating on Lowe's, reflecting broader economic uncertainties and a slowdown in the home improvement sector.
In other developments, Lowe's promoted Jennifer Wilson to the role of senior vice president and chief marketing officer, increased its quarterly cash dividend by 5% to $1.15 per share, and expanded its same-day delivery options by partnering with DoorDash (NASDAQ:DASH) and Shipt.
InvestingPro Insights
As Lowe's Companies Inc (NYSE: LOW) navigates through market expectations and its recent earnings report, InvestingPro data and tips provide additional insights for investors. With a Market Cap of $137.23 billion and a P/E Ratio standing at 19.23, Lowe's is seen as a significant player in the Specialty Retail industry. Notably, the company has maintained its dividend payments for 54 consecutive years, underscoring its commitment to returning value to shareholders. This is further evidenced by the fact that Lowe's has raised its dividend for 40 consecutive years, with a current Dividend Yield of 1.89% as of the last dividend ex-date on July 24, 2024.
Despite a downward revision by 11 analysts for the upcoming period, Lowe's has been profitable over the last twelve months, with a Basic EPS of $12.51. This profitability is projected to continue, with analysts predicting the company will remain profitable this year. Moreover, the company's stock has demonstrated strong returns over the last five years, which might reassure investors looking at the long-term potential. For those seeking more in-depth analysis, there are additional InvestingPro Tips available on Lowe's, which can be found through the InvestingPro platform.
Investors considering Lowe's as part of their portfolio may want to consider these metrics and tips in the context of the company's long-standing history of dividend payments and its ability to maintain profitability in a challenging retail environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.