Lowe’s Is Well Worth Watching Ahead of Q4 Earnings; Target Price $287

Home improvement retailer Lowe’s would post higher earnings and revenues in the holiday quarter, but rising transportation and labour costs could impact the results.

The Mooresville, North Carolina-based retailer to report its fourth-quarter earnings of $1.69 per share, representing year-over-year growth of over 27% from $1.33 per share seen in the same period a year ago.

The company that distributes building materials and supplies through stores in the United States would post revenue growth of over 2% to $20.82 billion.

In December, the retailer said it anticipates total sales to be between $94 billion and $97 billion for 2022. Lowe’s predicts a 3% decrease in same-store sales this year. Moreover, it forecast earnings per share of $12.25 to $13.

“We expect the company’s stock to trade higher post-fourth-quarter results – as its revenues and earnings are likely to beat consensus estimates. The home improvement retailer has invested quickly and heavily to build out its digital capabilities to accommodate its demand surge during the pandemic. In fact, the home improvement retailer is able to maintain its sales momentum as consumers continue to take on more projects,” noted equity analysts at TREFIS.

“Factors such as an increase in remote working, online school classes, and colder weather should bode well for the company’s continued sales momentum into the fourth quarter as well. Our forecast indicates that Lowe’s valuation is $256 per share, which is almost 15% higher than the current market price.”

Lowe’s stock traded 2.33% lower at $217.58. The stock fell nearly 16% so far this year after surging over 61% in 2021.

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. Combined with productivity initiatives, this should enable EBIT margin expansion going forward.”

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 $287.46 with a high forecast of $300.00 and a low forecast of $275.00.

The average price target represents a 30.52% change from the last price of $220.24. Of those 14 analysts, 13 rated “Buy”, one rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $280 with a high of $365 under a bull scenario and $190 under the worst-case scenario. The investment bank gave an ” Overweight ” rating on the home improvement retailer’s stock.

Several analysts have also updated their stock outlook. Citigroup raised the price target to $292 from $270. Truist Securities lifted the price objective to $293 from $284. Evercore ISI cut the target price to $270 from $280.

Technical analysis suggests it is good to hold as 100-day Moving Average and 100-200-day MACD Oscillator gives a mixed signal.

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