As Lowe's Companies, Inc. (LOW Quick QuoteLOW - Free Report) prepares to unveil its third-quarter fiscal 2024 earnings on Nov. 19 before the opening bell, investors are keenly observing its performance. With a projected decline in the top and bottom-line figures, the upcoming earnings release prompts a critical question: Can Lowe’s meet or exceed expectations despite these anticipated decreases in profitability?

The Zacks Consensus Estimate for the to-be-reported quarter’s revenues is pegged at $20 billion, which suggests a drop of 2.5% from the prior year’s levels. However, the rate of decline shows a deceleration from a 5.5% decrease witnessed in the preceding quarter. 

The consensus mark for quarterly earnings has risen by a penny over the past seven days to $2.81 per share, but it still calls for a decline of 8.2% from the year-ago quarter’s reported figure.

LOW has a trailing four-quarter earnings surprise of 3.3%, on average. In the last reported quarter, this Mooresville, NC-based company’s bottom line outperformed the Zacks Consensus Estimate by a margin of 3.5%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Key Factors to Observe for LOW's Q3 Earnings

A primary area of concern for Lowe’s remains the Do-It-Yourself (DIY) home improvement segment. The drop in DIY spending suggests a broader consumer shift, as many prioritize essential expenditures over home improvement projects. Cautious spending behavior has become more apparent, with consumers delaying big-ticket purchases, such as flooring, kitchens and bath products. 

Underlying inflationary pressures have led to more conservative consumer spending on major renovation projects that typically drive higher sales volumes and profitability for Lowe's. We anticipate continued pressure on comparable sales, with a projected year-over-year decrease of 3.1% in the third quarter.

Moreover, margins remain a critical area to monitor, with potential concerns stemming from any deleverage in the selling, general and administrative (SG&A) rate, especially as Lowe’s continues to invest in store operations and customer experience. We expect SG&A expenses, as a percentage of sales, to deleverage by 80 basis points in the third quarter, which is likely to contribute to an anticipated 70-basis point contraction in the operating margin.

Despite these headwinds, Lowe’s has been proactive in responding to evolving consumer behaviors and market dynamics. The Pro segment remains a significant growth driver for Lowe’s as the company continues to execute its multi-year strategy to improve product offerings, fulfillment options and the overall shopping experience for professional customers. Furthermore, strategic investments in the Total Home strategy, including modernizing the supply chain and IT infrastructure and enhancing merchandising assortments, position the company to navigate the challenges.

What the Zacks Model Says About LOW

As investors prepare for Lowe’s third-quarter announcement, the question looms regarding earnings beat or miss. Our proven model predicts an earnings beat for Lowe’s this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.

Lowe’s has a Zacks Rank #3 and an Earnings ESP of +1.87%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With the Favorable Combination

Here are three other companies you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this season:

Target (TGT Quick QuoteTGT - Free Report) has an Earnings ESP of +1.21% and currently carries a Zacks Rank of 2. TGT’s top line is anticipated to advance year over year when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $25.9 billion, which suggests a 2.1% rise from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is expected to register an increase in the bottom line. The consensus estimate for Target’s third-quarter earnings is pegged at $2.29 per share, up 9.1% from the year-ago quarter. TGT has a trailing four-quarter earnings surprise of 20.3%, on average.

Walmart (WMT Quick QuoteWMT - Free Report) currently has an Earnings ESP of +1.44% and a Zacks Rank of 3. The company is likely to register an increase in the bottom line when it reports third-quarter fiscal 2025 numbers. The Zacks Consensus Estimate for quarterly earnings per share of 53 cents implies a rise of 3.9% from the year-ago reported number. 

Walmart’s top line is expected to ascend year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $167.5 billion, which suggests an increase of 4.2% from the prior-year quarter. WMT has a trailing four-quarter earnings surprise of 6.9%, on average.

Five Below (FIVE Quick QuoteFIVE - Free Report) has an Earnings ESP of +19.73% and currently carries a Zacks Rank of 3. FIVE’s top line is anticipated to advance year over year when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $799.2 million, which suggests an 8.5% rise from the figure reported in the year-ago quarter. 

The company is expected to register a decline in the bottom line. The consensus estimate for Five Below’s third-quarter earnings is pegged at 16 cents a share, down 38.5% from the year-ago quarter. FIVE has a trailing four-quarter earnings surprise of 1.6%, on average.