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Why Has Lowe's Suddenly Fallen Off Investors' Radar?

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Lowe's Companies, Inc. (LOW - Free Report) has been appearing bearish for quite some time now. This Zacks Rank #4 (Sell) company has been disappointing investors with its lower-than-expected top- and bottom-line results since the past two quarters. In the second and third quarters of fiscal 2016, the company posted a negative earnings surprise of 3.5% and 8.3%, respectively.

A look at Lowe’s share price movement reveals that it has underperformed the Zacks categorized Building Products-Retail/Wholesale industry in the past six months. Its shares have declined nearly 12%, against the Zacks categorized industry’s decline of 1.7% in that time frame.

Estimates Going Downhill

We noted that estimates have moved south over the past 60 days. Over the said time frame, the Zacks Consensus Estimate for fiscal 2016 and fiscal 2017 has declined 2% to $3.92 and 2.2% to $4.55, respectively. This came on the back drop of lower-than-anticipated results and trimmed outlook.

In the third quarter, the company recorded adjusted earnings of 88 cents a share that missed the Zacks Consensus Estimate of 96 cents. Also, net sales of $15,739 million fell short of the Zacks Consensus Estimate of $15,798 million. This compelled management to trim its full year earnings guidance, which is now expected to be $3.52 per share, sharply down from the earlier projection of $4.06.

Other Challenges

Lowe’s faces stiff competition from The Home Depot, Inc. (HD - Free Report) , whose shares have increased 1.6% and 11.7% in the past six months and one year, respectively.  It also competes with other home supply retailers on attributes like location, price and quality of merchandise, in-stock consistency, merchandise assortments, as well as customer service. Moreover, lower discretionary spending on the part of consumers may further hurt the company’s performance.

Key Picks

Better-ranked stocks in the broader retail space include The Children's Place, Inc. (PLCE - Free Report) and Christopher & Banks Corp. (CBK - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Children's Place, with a long-term earnings growth rate of 10.3% has surged a whopping 61.7% in the past one year.

Christopher & Banks, with a long-term earnings growth rate of 15% has gained 42.6% in the past one year.

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