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Lowe's (LOW) Q1 Earnings & Sales Beat on Strong Pro Business

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Lowe’s Companies, Inc. (LOW - Free Report) has reported robust first-quarter fiscal 2021 results, wherein earnings and sales outpaced the Zacks Consensus Estimate and grew year over year. Notably, the company delivered the eighth straight earnings beat and the fifth consecutive sales surprise.

Results benefited from its focus on the execution of strategies to meet the strong demand across the board. Backed by the demand, the company recorded sales growth of more than 30% in the Pro category and more than 18% in all U.S. regions. Moreover, sales growth in Canada was higher than that in the United States. Going forward, management is committed toward expanding market share and boosting operating margin expansion.

Moreover, the company has been investing in providing pandemic-related support to frontline hourly associates through bonuses and incentives. In the reported quarter, the company paid Winning Together profit-sharing bonus across all Lowe’s stores. Management invested $152 million to assist frontline hourly associates in the reported quarter, which was above the targeted level by $70 million.

Year to date, shares of the home-improvement retailer have gained 20.1% compared with the industry’s growth of 15.9%.

 

 

Q1 in Detail

Adjusted earnings of $3.21 per share surpassed the Zacks Consensus Estimate of $2.58 and rose 81% year over year. Earnings benefited from robust sales growth and operating margin expansion.

Net sales of $24,422 million rose 24.1% year over year and surpassed the Zacks Consensus Estimate of $23,659 million. Notably, comparable sales increased 25.9% in the quarter under review. Comparable sales for the U.S. home-improvement business reflected a robust rise of 24.4% in the reported quarter.

Lowes Companies, Inc. Price, Consensus and EPS Surprise

 

Lowes Companies, Inc. Price, Consensus and EPS Surprise

Lowes Companies, Inc. price-consensus-eps-surprise-chart | Lowes Companies, Inc. Quote

Gross profit improved 24.8% year over year to $8,130 million, while gross margin expanded 20 basis points to 33.3% on strong top-line growth.

Other Financial Aspects

The Zacks Rank #3 (Hold) company ended the fiscal first quarter with cash and cash equivalents of $6,692 million, long-term debt (excluding current maturities) of $21,906 million, and shareholders’ equity of $445 million.

Lowe’s generated cash flow from operations of $4,492 million as of Apr 30, 2021. Moreover, the company spent $461 million toward capital expenditure in the fiscal first quarter.

In the fiscal first quarter, Lowe’s bought back 16.8 million shares for $3.1 billion and paid out dividends of $440 million.

As of Apr 30, 2021, the company operated 1,972 home-improvement and hardware stores across the United States and Canada. Further, it serviced nearly 230 dealer-owned stores.

Key Things to Note

Followed by the strong quarterly performance, Lowe’s noted that the sales momentum continued in May. The company is also delivering ahead of the perspectives issued at the Investor Update on Dec 9, 2020. On Dec 9, the company introduced the Total Home strategy that includes providing complete solutions for various types of home repair and improvement needs. The strategy is an extension of the company’s retail-fundamentals approach.

Management highlighted that the new strategy focuses on strengthening customer engagement and market share, especially through the intensified focus on Pro customers. Moreover, the initiative encompasses improving online business, refurbishing installation services as well as enhancing localization efforts.

The strategy targets fiscal 2021 sales of $86 billion. Driven by the strong year-to-date results and the improving macro environment, the company expects to gain market share and deliver an operating margin of 12%.

Furthermore, Lowe’s is planning share buybacks of $9 billion and capital expenditure of $2 billion for fiscal 2021.

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