Lowe’s Shares Rise After Earnings Blow Past Estimates and Company Lifts Outlook

Shares of the home improvement retailer Lowe’s rose over 3% on Wednesday after the company reported better-than-expected earnings in the holiday quarter and lifted annual sales and profit outlook.

The Mooresville, North Carolina-based retailer reported quarterly adjusted earnings of $1.78​​ per share, beating the Wall Street consensus estimates of $1.71 per share.

The company that distributes building materials and supplies through stores in the United States said its revenue jumped over 5.0% to $21.34 billion from a year earlier. That too topped the market expectations of $20.90 billion.

Lowe’s expects to reach $97 billion to $99 billion in sales for its fiscal 2022, up from a previous forecast of $94 billion to $97 billion. Earnings per share are expected to increase from $12.25 to $13 in the company’s last forecast to $13.10 to $13.60 this year.

“Lowe’s beat consensus estimates on comps, gross margins and operating margins, as well as EPS. This compares to HD’s print yesterday which was better on comps but not as strong on gross margins. And, after giving initial 2022 guidance just two months ago, Lowe’s (LOW) raised their outlook next year to above consensus levels, which we were not expecting,” noted Michael Baker,  Senior Research Analyst at D.A. Davidson.

“Our key theme of a company-specific improvement played out this quarter, driven by LOW’s ability to close the gap with HD both on pro penetration and operating margins. And, like HD, Lowe’s 4Q comp was better than 3Q for the 10th of the last 13th years.”

Lowe’s stock traded 3.25% higher at $221.53. The stock fell over 14% so far this year after surging over 61% in 2021.

Analyst Comments

“With home center EPS now wrapped up, we’re incrementally confident that the sector remains attractive for investment. Lowe’s (LOW) 2-yr comp seq. accelerated (like HD) despite stimulus headwinds, and MTD sales reveal a sustained trend. We forecast sales above the guidance midpoint, believing an aged housing stock, refined DIY skillsets, and pricing can slightly outweigh rising rates and wallet share rotation toward services for positive dollar growth,” noted Jonathan Matuszewski, equity analyst at Jefferies.

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 30.24% change from the last price of $220.72. 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.

“Strong results and guide, could be a momentum shifter in terms of sentiment. 13% EBIT margins in sight, albeit with an extra week. Margin expansion, underpinned by improving GM’s should be rewarded. OW, $280 PT,” noted Simeon Gutman, equity analyst at Morgan Stanley.

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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