Back to top

Image: Bigstock

Lowe's Hits 52-Week High on Robust Comps & Digital Presence

Read MoreHide Full Article

Shares of Lowe’s Companies, Inc. (LOW - Free Report) touched a new 52-week high of $114.53 on Sep 11, closing a tad lower at $114.18. In the past six months, the company’s shares rallied 32.6%, substantially outpacing the industry’s rise of 18.1% and the S&P 500’s rise of 4%.

Notably, this North Carolina-based company has been gaining from robust second-quarter fiscal 2018 results, wherein it came up with sturdy comps performance on increased traffic and strong digital presence.

Let’s Delve Deeper

Lowe’s, which shares space with one of its biggest competitors, Home Depot HD,has been delivering robust top-line performance for quite some time now.Notably, sales in the second quarter advanced 7.1% year over year after posting an improvement of 3% in the preceding quarter. Prior to that, the company posted sales growth of 1.8%, 6.5%, 6.8% and 10.7% in the fourth, third, second and first quarters of fiscal 2017, respectively.

Additionally, comparable sales (comps) rose 5.2% in the second quarter of fiscal 2018, following an increase of 0.6% in the first quarter. Comps increased 4.1%, 5.7%, 4.5% and 1.9% in the fourth, third, second and first quarters of fiscal 2017, respectively. Comps during the second quarter primarily gained from delayed spring demand, increased traffic, growth in transactions as well as 4.5% rise in average ticket. Taking a look at the monthly trends, comps registered growth of 0.6% in February, 1.1% in March, 0.1% in April, 8.2% in May, 4.2% in June, and 3% in July. Encouragingly, management expects comps to continue rising in the forthcoming periods, thereby anticipating a rise of about 3% for fiscal 2018.

Further, robust comps werebuoyed by strong digital presence. During the second quarter, the company achieved 18% comps growth on Management continues to augment omni-channel capabilities and enhance consumers’ digital shopping experience. In this respect, the company plans on optimizing search capabilities that will aid in planning assortments effectively. Such well-chalked efforts are likely to provide further impetus to the company’s comps in the forthcoming periods.

Apart from these, the company also boasts of a good history of returning high value to its shareholdersfor 56 years. Despite this long streak, the dividend continues to grow at a blistering pace.

Valuation Perspective

Lowe’s also looks attractive from the valuation perspective. The company with a Value Score of B has price-to-sales ratio of 1.32 versus the industry’s 1.59. This indicates that the stock has enough upside potential. Also, it looks attractive with respect to a forward price-to-earnings (P/E) ratio of 22.6 versus industry’s 25.6.

Bottom Line

However, we note that Lowe’s recently announced its plans to exit Orchard Supply Hardware operations. In connection with this, management expects to incur incremental pre-tax costs of $390-$475 million in the second half of fiscal 2018 owing to severance and lease obligations as well as accelerated depreciation and amortization costs. Nonetheless, this decision bodes well for the long run as it is expected to help the company focus more on prospective areas such as home improvements.

All said, we expect Lowe’s to continue being in investors’ good books. Markedly, the company carries a Zacks Rank #3 (Hold) and has long-term earnings growth rate of 14.4%.

Apart from Lowe’s, companies like Boot Barn Holdings, Inc. BOOT and Dollar General Corporation DG also scaled 52-week highs on Sep 11. Shares of Boot Barn Holdings hit a 52-week high of $31.41, though it closed a tad lower at $31. It has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Dollar General hit a 52-week high of $112.59, closing lower at $111.15. It has a Zacks Rank #3.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Lowes Companies, Inc. (LOW) - free report >>

Published in