It has been about a month since the last earnings report for Lowe's (
LOW Quick Quote LOW - Free Report) . Shares have lost about 0.2% in that time frame, outperforming 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 Q3 Earnings Beat Estimates, Sales Rise Y/Y
Lowe’s posted solid third-quarter fiscal 2022 results, with both the top and the bottom line beating the Zacks Consensus Estimate. Also, both metrics improved from the previous fiscal year’s quarterly readings.
Results benefited from higher comparable sales (comps) and Pro sales as well as improved DIY sales trends. Sales on Lowes.com grew 12% compared with 25% growth seen last year. Also, LOW witnessed a substantial improvement in adjusted operating margin on the back of disciplined execution and cost management. Quarter in Detail
Earnings per share (EPS) of $3.27 surpassed the Zacks Consensus Estimate of $3.11 and rose 19.8% from the third-quarter fiscal 2021 tally.
Net sales of $23,479 million increased 2.4% year over year and exceeded the Zacks Consensus Estimate of $23,150 million. Comps inched up 2.2% in the quarter under review. Comparable sales for the U.S. home-improvement business rose 3% in the reported quarter. Pro-customer sales jumped 19%, recording the 10th consecutive quarter of a double-digit increase. Gross profit inched up 3% year over year to $7,818 million, while gross margin expanded 20 basis points (bps) to 33.3%. Operating income amounted to $4,229 million, up 0.5% year over year. Operating margin significantly contracted to 3.93% from 12.17% recorded in the year-earlier quarter. Other Financial Aspects
LOW ended the quarter with cash and cash equivalents of $3,192 million, long-term debt (excluding current maturities) of $32,904 million and shareholders’ deficit of $12,868 million.
Lowe’s generated cash flow from operations of $8,138 million for the nine months ended Oct 28, 2022. Capital expenditures amounted to $1,090 million. For fiscal 2022, LOW expects a capex of up to $2 billion. In the reported quarter, Lowe’s bought back 20.5 million shares for $4 billion and paid out dividends of $666 million. LOW expects to repurchase nearly $13 billion of shares in fiscal 2022 compared with the earlier projection of $12 billion. As of Oct 28, 2022, Lowe’s operated 1,969 home-improvement and hardware stores across the United States and Canada. LOW serviced nearly 212 dealer-owned stores. Outlook
Management updated guidance for fiscal 2022. LOW expects revenues of $97-98 billion (including the 53rd week). The 53rd week is likely to witness a sales increase by $1-$1.5 billion. In fiscal 2021, Lowe’s revenues amounted to $96.3 billion.
Comparable sales in fiscal 2022 are envisioned in the range of flat to a 1% fall from the previous fiscal year’s reported figure. Lowe’s continues to expect the gross margin rate to improve slightly from the last fiscal year’s level. The adjusted operating margin is expected to be 13%. Management anticipates earnings per share of $13.65-$13.80 for the current fiscal year compared with the earlier projected range of $13.10-$13.60. How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
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. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Lowe's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Lowe's belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Home Depot (
HD Quick Quote HD - Free Report) , has gained 5.2% over the past month. More than a month has passed since the company reported results for the quarter ended October 2022.
Home Depot reported revenues of $38.87 billion in the last reported quarter, representing a year-over-year change of +5.6%. EPS of $4.24 for the same period compares with $3.92 a year ago.
Home Depot is expected to post earnings of $3.28 per share for the current quarter, representing a year-over-year change of +2.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.6%.
Home Depot has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.