We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Which Retail Stock Is a Better Buy: Lowe's (LOW) or Home Depot (HD)?
Read MoreHide Full Article
Lowe’s Companies (LOW - Free Report) and Home Depot (HD - Free Report) have grown into two very well-known and widely-regarded home improvement names operating within the retail sector.
The two companies provide very similar services and products, potentially clouding the ability of investors to differentiate the two. With financial analysis and earnings data, we will make a well-informed decision on who is showing greater signs of strength.
Let’s take a magnified view of HD and LOW’s recent performance and key financial metrics to determine which stock would be a better buy for investors seeking to capitalize on return in this industry.
Lowe’s
Lowe’s currently has an impressive $153 billion market cap and is trading with a beta of 1.34. The firm enjoys rewarding its investors with dividends; the current annual dividend yield for the company’s shares is 1.4%. In total, there have been five dividend increases in the last six years, and Lowe’s boasts an impressive five-year annualized dividend growth rate of 16%.
LOW’s most recent earnings report was a joyful experience for investors, displaying a 3.5% earnings beat. The consensus estimate for the report was pinged in at $1.72 and the company reported a quarterly EPS of $1.78, beating the estimate by a total of six cents.
The company is no stranger to earnings beats; it has done so in each of its last four reported earnings. Lowe’s average earnings surprise over that time is sitting nicely at 12.9%.
Image Source: Zacks Investment Research
Lowe’s has been extremely dedicated to providing and uplifting its workers during times of duress. In its most recent report, the company proudly announced that it was providing a massive discretionary year-end bonus of nearly $270 million to its front-line associates, citing their dedication and hard work during the pandemic. Generally, companies that provide a great deal of thoughtfulness to its employees achieve greater success due to the mutually beneficial relationship created.
The DIY giant’s current forward earnings multiple is 19.1X, off approximately 19% of its high of 23.6X last December. LOW’s share price is down nearly 12% year-to-date, representing a nice opportunity to buy the stock at a discount that has consistently grown its bottom line.
Image Source: Zacks Investment Research
Additionally, Lowe’s revenue of $96 billion over the past 12 months places the company at a very impressive rank of eight out of 261 similar companies in the industry. The industry giant’s top line has beaten estimates in each of its last four reports and has an average sales surprise of $6.56 million.
LOW currently has a 0.33% ESP score and has a Value Style Score of C, a Growth Style Score of C, and a Momentum Style Score of A. Its overall VGM Score is a B and is a Zacks Rank #2 (Buy). In the next three to five years, it is expecting to see EPS growth of 12.1%.
Home Depot
Home Depot’s current market cap is sitting much higher, at around $341 billion, and trades at a lower beta of 1.06. The company’s annual dividend yield is 2% and has obtained an admirable five-year annualized dividend growth rate of 18.7% to the likes of investors.
HD’s most recent earnings report surprised by a modest 0.31%, ringing in four consecutive positive EPS surprises over the last four reports and increasing its latest EPS to $3.21 per share. The average surprise over this period for Home Depot is also sitting in the double-digits at a respectable 11.1%.
HD stated in a recent proxy that it’s dedicated to taking care of its employees, which is a very important aspect of its culture. The company added a nearly eye-opening $2 billion in enhanced pay and benefits for its associates in fiscal 2020, citing their hard work and dedication to the company. The COVID-19 benefits have been molded into permanent compensation enhancements, adding $1 billion of incremental expenses on an annualized basis.
The company’s current P/E ratio is sitting at 21.1X, 23% off its high of 27.6X. Price action has not been favorable for HD either; it is down nearly 22% year-to-date. Home Depot’s forward earnings multiple has increased 5% since its low of 19.9X in late February, telling us the share price is climbing at a higher rate than earnings are.
Image Source: Zacks Investment Research
The company’s trailing-twelve-month revenue of $151 billion places it nearly at the top of its entire industry at number three out of 261. HD’s revenue has surprised in each of its last four reports, clocking in with an average surprise of 4.2%.
Home Depot’s current earnings ESP score is 0.51%, has a Value Style Score of C, a Growth Style Score of D, and a Momentum Style Score of C. Its overall VGM score is a C and is currently a Zacks Rank #3 (Hold). For the next three to five years, Home Depot is expected to expand its bottom line by 9.8%
Final Conclusion
Home Depot and Lowe’s are both stocks that provide great exposure to the home improvement industry and also allow investors to get their feet into the retail sector. However, one of these names seems to stand up slightly stronger than the other.
After assessing and diving deeper into earnings reports and key financial metrics in a comparable way, a conclusion can be made regarding which name is considered to be a better investment.
Within the metrics above, Home Depot beats Lowe’s in market valuation, revenue, beta, and dividend yield. Lowe’s has a higher average earnings surprise, lower P/E ratio, higher VGM Score, higher forecasted EPS growth over the next three to five years, and most importantly has a higher Zacks Rank #2 (Buy) than Home Depot.
Due to the comparison above, I believe that Lowe’s is currently a better potential investment in this industry than Home Depot is.
Image Source: Zacks Investment Research
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Which Retail Stock Is a Better Buy: Lowe's (LOW) or Home Depot (HD)?
Lowe’s Companies (LOW - Free Report) and Home Depot (HD - Free Report) have grown into two very well-known and widely-regarded home improvement names operating within the retail sector.
The two companies provide very similar services and products, potentially clouding the ability of investors to differentiate the two. With financial analysis and earnings data, we will make a well-informed decision on who is showing greater signs of strength.
Let’s take a magnified view of HD and LOW’s recent performance and key financial metrics to determine which stock would be a better buy for investors seeking to capitalize on return in this industry.
Lowe’s
Lowe’s currently has an impressive $153 billion market cap and is trading with a beta of 1.34. The firm enjoys rewarding its investors with dividends; the current annual dividend yield for the company’s shares is 1.4%. In total, there have been five dividend increases in the last six years, and Lowe’s boasts an impressive five-year annualized dividend growth rate of 16%.
LOW’s most recent earnings report was a joyful experience for investors, displaying a 3.5% earnings beat. The consensus estimate for the report was pinged in at $1.72 and the company reported a quarterly EPS of $1.78, beating the estimate by a total of six cents.
The company is no stranger to earnings beats; it has done so in each of its last four reported earnings. Lowe’s average earnings surprise over that time is sitting nicely at 12.9%.
Image Source: Zacks Investment Research
Lowe’s has been extremely dedicated to providing and uplifting its workers during times of duress. In its most recent report, the company proudly announced that it was providing a massive discretionary year-end bonus of nearly $270 million to its front-line associates, citing their dedication and hard work during the pandemic. Generally, companies that provide a great deal of thoughtfulness to its employees achieve greater success due to the mutually beneficial relationship created.
The DIY giant’s current forward earnings multiple is 19.1X, off approximately 19% of its high of 23.6X last December. LOW’s share price is down nearly 12% year-to-date, representing a nice opportunity to buy the stock at a discount that has consistently grown its bottom line.
Image Source: Zacks Investment Research
Additionally, Lowe’s revenue of $96 billion over the past 12 months places the company at a very impressive rank of eight out of 261 similar companies in the industry. The industry giant’s top line has beaten estimates in each of its last four reports and has an average sales surprise of $6.56 million.
LOW currently has a 0.33% ESP score and has a Value Style Score of C, a Growth Style Score of C, and a Momentum Style Score of A. Its overall VGM Score is a B and is a Zacks Rank #2 (Buy). In the next three to five years, it is expecting to see EPS growth of 12.1%.
Home Depot
Home Depot’s current market cap is sitting much higher, at around $341 billion, and trades at a lower beta of 1.06. The company’s annual dividend yield is 2% and has obtained an admirable five-year annualized dividend growth rate of 18.7% to the likes of investors.
HD’s most recent earnings report surprised by a modest 0.31%, ringing in four consecutive positive EPS surprises over the last four reports and increasing its latest EPS to $3.21 per share. The average surprise over this period for Home Depot is also sitting in the double-digits at a respectable 11.1%.
HD stated in a recent proxy that it’s dedicated to taking care of its employees, which is a very important aspect of its culture. The company added a nearly eye-opening $2 billion in enhanced pay and benefits for its associates in fiscal 2020, citing their hard work and dedication to the company. The COVID-19 benefits have been molded into permanent compensation enhancements, adding $1 billion of incremental expenses on an annualized basis.
The company’s current P/E ratio is sitting at 21.1X, 23% off its high of 27.6X. Price action has not been favorable for HD either; it is down nearly 22% year-to-date. Home Depot’s forward earnings multiple has increased 5% since its low of 19.9X in late February, telling us the share price is climbing at a higher rate than earnings are.
Image Source: Zacks Investment Research
The company’s trailing-twelve-month revenue of $151 billion places it nearly at the top of its entire industry at number three out of 261. HD’s revenue has surprised in each of its last four reports, clocking in with an average surprise of 4.2%.
Home Depot’s current earnings ESP score is 0.51%, has a Value Style Score of C, a Growth Style Score of D, and a Momentum Style Score of C. Its overall VGM score is a C and is currently a Zacks Rank #3 (Hold). For the next three to five years, Home Depot is expected to expand its bottom line by 9.8%
Final Conclusion
Home Depot and Lowe’s are both stocks that provide great exposure to the home improvement industry and also allow investors to get their feet into the retail sector. However, one of these names seems to stand up slightly stronger than the other.
After assessing and diving deeper into earnings reports and key financial metrics in a comparable way, a conclusion can be made regarding which name is considered to be a better investment.
Within the metrics above, Home Depot beats Lowe’s in market valuation, revenue, beta, and dividend yield. Lowe’s has a higher average earnings surprise, lower P/E ratio, higher VGM Score, higher forecasted EPS growth over the next three to five years, and most importantly has a higher Zacks Rank #2 (Buy) than Home Depot.
Due to the comparison above, I believe that Lowe’s is currently a better potential investment in this industry than Home Depot is.
Image Source: Zacks Investment Research