Lowe’s Hovers Near Record High Ahead of Q3 Earnings

Lowe’s Companies Inc, a home improvement retailer, is expected to report its third-quarter earnings of $2.33 per share, which represents year-over-year growth of over 17% from $1.98 per share seen in the same period a year ago.

The Mooresville, North Carolina-based company’s revenue would decline more than 1% to $22 billion from $22.31 billion a year earlier. The company has beaten earnings three times in the last four quarters.

“Lowe’s is impressed with its performance during the first half of fiscal 2021. Management highlighted that the strong sales trends have continued into August. Accordingly, the company raised its view for the fiscal,” noted analysts at ZACKS Research.

The company now expects to generate revenues of nearly $92 billion, up from its previous prediction of $86 billion. According to the latest top-line view, growth was nearly 2.7% year over year, ZACKS Research added.

On a two-year stacked basis, it represents a comparable sales growth of nearly 30%. Operating margins should be about 12.2%, while gross margins will be about 1% higher. In fiscal 2021, the company expects to repurchase shares worth at least $9 billion.

Lowe’s shares rose over 46% so far this year. The stock ended 0.59% lower at $234.92 on Monday – not far from the record high of $539.15 hit early this month.

Lowe’s Stock Price Forecast

Fourteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $241.82 with a high forecast of $265.00 and a low forecast of $217.00.

The average price target represents a 2.94% change from the last price of $234.92. From those 14 analysts, 11 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Technical analysis suggests it is good to buy as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Morgan Stanley gave the base target price of $255 with a high of $310 under a bull scenario and $150 under the worst-case scenario. The firm gave an “Overweight” rating on the home improvement retailer’s stock.

Several other analysts have also updated their stock outlook. Piper Sandler raised the target price to $231 from $225. Telsey Advisory Group lifted the target price to $250 from $240. Citigroup upped the price target to $270 from $239.

Analyst Comments

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience.”

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