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Lowe's (LOW) Down 8.7% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Lowe's (LOW - Free Report) . Shares have lost about 8.7% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Lowe's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Lowe's Q1 Earnings Beat Estimates, Sales Decline Y/Y

Lowe’s delivered mixed first-quarter fiscal 2022 results, with the top line lagging the Zacks Consensus Estimate and the bottom line beating the same. Also, earnings improved on a year-over-year basis on strong margins. LOW has been witnessing improving sales trends in May so far.

Quarter in Detail

Earnings per share (EPS) of $3.51 surpassed the Zacks Consensus Estimate of $3.24 and rose 9.3% from the adjusted EPS of $3.21 recorded in the first quarter of fiscal 2021.

Net sales of $23,659 million were down 3.1% year over year and came below the Zacks Consensus Estimate of $23,731 million. Comparable sales dipped 4% in the quarter under review. Comparable sales for the U.S. home-improvement business decreased 3.8% in the reported quarter. Pro customer sales jumped 20%.

Gross profit dipped 0.9% year over year to $8,050 million, while gross margin expanded 74 basis points (bps) to 34.03%. Operating income amounted to $3,302 million, up 1.8% year over year. Operating margin expanded 67 bps to 13.96%, on gains from the Total Home strategy and the execution of the Perpetual Productivity Improvement initiative.

Other Financial Aspects & Developments

LOW ended the quarter with cash and cash equivalents of $3,414 million, long-term debt (excluding current maturities) of $28,776 million and a shareholders’ deficit of $6,877 million.

Lowe’s generated cash flow from operations of $2,977 million for the three months ended Apr 29, 2022. Capital expenditures amounted to $343 million. For fiscal 2022, LOW expects capital expenditures of nearly $2 billion.

In the reported quarter, Lowe’s bought back around 19 million shares for $4.1 billion and paid out dividends of $537 million. LOW expects to repurchase nearly $12 billion shares in fiscal 2022.

Outlook

Management reiterated guidance for fiscal 2022. LOW expects revenues of $97-99 billion (including the 53rd week). The 53rd week is likely to increase sales by $1-$1.5 billion. In fiscal 2021, Lowe’s revenues amounted to $96.3 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Lowe's has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Lowe's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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