Bull of the Day: Lowe’s (LOW)

Based in Mooresville, NC, Lowe’s Companies LOW is a leading home improvement retailer, with operations primarily in the U.S. and Canada. The company offers services and products for homeowners, renters, and commercial business customers; Lowe’s has also been enhancing its professional offerings for contactors and other builders.

Q3 Earnings Impress Wall Street

Revenue grew by 2.7% to $22.9 billion last quarter, building on the explosive growth recorded in Q3 2020, while Lowe’s reported diluted earnings of $2.73 per share, up 37.9% compared to the prior-year period.

Comparable store sales increased 2.2% year-over-year, with inflation and big-ticket sales (like appliances and flooring) resulting in a 9.7% increase in the average ticket.

Operating margin expanded 240 basis points to 12.2%, demonstrating Lowe’s overall efficiency.

CEO Marvin Ellison attributed the momentum to the return of DIY projects. “After Labor Day, we saw an increase in DIY demand on the weekends as travel activity slowed down and children returned to school. As a result, consumers were once again spending more time on projects in their homes,” he said on the earnings conference call.

Management expects these sales trends to continue into Q4 now that the weather is getting colder and people are spending more time at home. Lowe’s anticipates revenue to hit $95 billion (vs. previous estimate of $92 billion) and operating profit margin to increase to 12.4% (vs. previous estimate of 12.2%) for the holiday quarter.

LOW Breaks Out

Lowe's Companies, Inc. Price and EPS Surprise

Lowe’s Companies, Inc. Price and EPS Surprise

Year-to-date, shares of LOW have soared roughly 20%, which is above the S&P 500’s almost 25% gain. Earnings estimates have been rising too, and Lowe’s is a Zacks Rank #1 (Strong Buy) stock right now.

For fiscal 2021, 12 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 62 cents to $11.91 per share. Earnings are expected to jump more than 34% compared to the prior year period. Fiscal 2022 looks strong too; 12 analysts have upped their outlook as well, and our consensus estimate has increased 78 cents to $12.60 per share.

Even throughout this year’s economic reopening, it’s become clear that the home is now an even more essential place for people; we’re still choosing to exercise at home, entertain at home, and work from home, and this kind of consumer behavior will only continue to benefit companies like Lowe’s.

Plus, Lowe’s is a Dividend King, having raised its dividend for 59 straight years. Shares currently yield 1.3% on an annual basis.

If you’re an investor searching for a home improvement stock to add to your portfolio, make sure to keep LOW on your shortlist.

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