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Lowe's (LOW) Q3 Earnings: Is a Disappointment in Store?

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Lowe's Companies, Inc. (LOW - Free Report) is slated to report third-quarter fiscal 2016 results on Nov 16. It has registered an average miss of 0.4% in the trailing four quarters. Let’s see how things are shaping up for this announcement.

Zacks Model Shows Unlikely Earnings Beat

Our proven model does not conclusively show that Lowe's is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

LOWES COS Price and EPS Surprise

LOWES COS Price and EPS Surprise | LOWES COS Quote

Lowe's has an Earnings ESP of -1.04% as the Most Accurate estimate is at 95 cents, while the Zacks Consensus Estimate is pegged at 96 cents. Moreover, the company carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Influencing this Quarter

With regard to the home improvement retailing business, Lowe’s faces intense competition from specialty and mass retailers and other online retailers, which along with a soft economic recovery, may prove to be a deterrent by pushing back home improvement projects. Further, expansion into regions where it already operates could cannibalize the company’s sales performance and lower traffic count at existing stores.

We note that Lowe’s posted dismal results in the second quarter, delivering a negative earnings surprise of 3.5%. Consequently, management lowered its fiscal 2016 earnings outlook. It projected fiscal 2016 earnings to be $4.06 per share, down from $4.11 predicted earlier. Moreover, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 has witnessed a downtrend over the past 30 days.

However, management seems to be optimistic about the home improvement industry in the second half of fiscal 2016. Also, continuous gains in the job market and increase in disposable income should drive consumer spending higher.

Stocks Poised to Beat Earnings Estimates

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Best Buy Co., Inc. (BBY - Free Report) has an Earnings ESP of +4.26% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hibbett Sports, Inc. (HIBB - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank #2.

Dollar Tree, Inc. (DLTR - Free Report) has an Earnings ESP of +1.28% and a Zacks Rank #3.

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