Lowe's Slips Despite Earnings Report Victories

Lowes Slips Despite Earnings Report Victories

Home improvement superstore chain Lowe's (NYSE:LOW) posted beats for earnings, revenue, and even comparable-store sales, but still slipped 2.3% in premarket trading. The slide continued into the trading day, though as of this writing it's off the session lows. Meanwhile, analysts are maintaining their collective position that's strongly in support of further investment with the company.

A Winning Earnings Report That Lost

Lowe's posted wins on several fronts with its first-quarter earnings report. The company brought out diluted earnings of $3.21 per share, which readily beat consensus estimates looking for $2.62 per share. That also beat the numbers seen for the first quarter of 2020 nearly two-fold, at $1.76 per share.

Revenue also delivered a beat, as the company turned in revenue of $24.42 billion, which beat the Refinitiv estimate of $23.86 billion. Additionally, $24.42 billion was more than sufficient to beat last year's first-quarter figures, which came in at $19.68 billion. Same-store sales growth even managed to beat projections, as the company posted gains of 25.9% for the quarter. That's well ahead of the 20.3% that a StreetAccount survey looked for.

Lowe's president and CEO, Marvin Ellison, pointed to several factors in illustrating the company's growth. Ellison pointed out that the company had seen a 30% increase in sales in its professional operations, as well as over 18% growth in all of Lowe's 15 US regions. Just to round it out, Ellison even pointed out how growth in Canada was actually stronger than growth in the US.

What Are Financial Analysts Saying About Lowes Stock?

As impressive as Lowe's gains were for this quarter, it simply wasn't enough for some analysts, reports noted. Wells Fargo analyst Zack Fadem noted that analysts were looking for growth rates in the “upper 20% to low 30% range”, and 24% gains just weren't sufficient to catch further interest. However, Fadem also noted that it was important for investors to consider other factors in Lowe's operations, including improvements in its gross margins as well as its general efficiency. The overall economic environment helps here as well, with Fadem looking for a continued strong housing market and demand for home improvement products accordingly.

Our latest research into the financial analyst community, meanwhile, is deeply bullish. Currently, Lowe's stock carries a consensus rating of “buy”, a rating that the company has held for over two years now, even if sentiment seems to have plateaued over the last year. A year ago, Lowe's stock had 26 “buy” ratings and two “hold” ratings to its credit. Six months ago, that shifted to 29 “buy” ratings and three “hold”. Today, we stand at 30 “buy” ratings and four “hold” ratings.

Lowe's stock price targets have a fairly broad range, with a high of $247 and a low of $135 contributing to an average of $188.94. That low target is fairly old as well, coming in from SunTrust Banks almost one year ago exactly, posted on May 21, 2020.

The recent changes for Lowe's have been universally positive, as in the last month alone, four analysts have raised their price targets. Morgan Stanley, Jefferies Financial Group, Citigroup, and Wells Fargo were all seen hiking price targets, some much more so than others; while Morgan Stanley offered a modest hike yesterday from $210 to $222, Jefferies took a much bigger step, going from $200 to $247 just five days ago. The only analyst that didn't change its target, Oppenheimer, upgraded the entire rating from “market perform” to “outperform.” With Lowe's trading at $187.76 as of this writing, it's clear that there's upside potential left to be had.

Companies in This Article:

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Lowe's Companies (LOW)$186.88+0.0%1.28%20.36Buy$200.59