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Lowe's (LOW) Q2 Earnings & Sales Beat Estimates, Stock Up

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Lowe’s Companies, Inc. (LOW - Free Report) reported robust second-quarter fiscal 2019 results, wherein both top and bottom lines improved year over year and surpassed the Zacks Consensus Estimate. Markedly, shares of the company were up close to 12% during the pre-market trading session.

Adjusted earnings of $2.15 a share exceeded the Zacks Consensus Estimate of $2.00 and increased 3.9% year over year. Including pre-tax losses related to the shutdown of Lowe’s Mexico retail operations, earnings came in at $2.14 per share compared with the year-ago period’s $1.86. We believe that bottom-line growth was backed by higher sales and lower SG&A expenses.

Lowe's Companies, Inc. Price, Consensus and EPS Surprise

Lowe's Companies, Inc. Price, Consensus and EPS Surprise

Lowe's Companies, Inc. price-consensus-eps-surprise-chart | Lowe's Companies, Inc. Quote

Net sales of $20,992 million beat the Zacks Consensus Estimate of $20,978 million. Notably, sales in the quarter under review advanced 0.5% year over year, following a 2.2% rise in the preceding quarter. The upside in the second quarter was backed by solid spring season demand, robust execution of holiday event, and improvement in Paint and Pro businesses.

Comparable sales rose 2.3% in the quarter under review, following an increase of 3.5% in the first quarter of fiscal 2019. Comparable sales for the U.S. home improvement business improved 3.2%, after a rise of 4.2% in the preceding quarter. Management stated that during the second quarter, Lowe’s saw comparable sales growth in all 15 U.S regions despite battling lumber deflation and inclement weather conditions.

Gross profit decreased 2.1% year over year to $6,740 million, while gross margin contracted around 85 basis points to 32.1%.

Other Financial Aspects

Lowe’s, which competes with Home Depot (HD - Free Report) , ended the quarter with cash and cash equivalents of $1,796 million, long-term debt (excluding current maturities) of $16,538 million and shareholders’ equity of $2,640 million.

The company generated cash flow from operations of $3,583 million in the six months ended Aug 2, 2019. In the reported quarter, it repurchased shares worth $1.96 billion and distributed $382 million as dividends.

Outlook

Management is pleased with the progress of its retail fundamentals and a robust macroeconomic consumer environment. These factors along with robust strategies drove Lowe’s sales. The company is on track with its transformation efforts and encouraged about its ongoing prospects, given the strong demand in the healthy home improvement space.

For fiscal 2019, management continues to project total sales growth of approximately 2%, with comparable sales expected to rise roughly 3%.

Lowe’s still envisions adjusted operating margin to expand 20-50 basis points in fiscal 2019.

The company projects adjusted earnings per share of $5.45-$5.65. The Zacks Consensus Estimate for earnings in the fiscal is currently pegged at $5.58.

Stock Price Performance

This Zacks Rank #3 (Hold) stock has gained 7.5% in the past three months compared with the industry’s growth of 16.9%.

Don’t Miss These Solid Retail Stocks

Target (TGT - Free Report) , with a Zacks Rank #2 (Buy), has a long-term earnings per share growth rate of 7.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Burlington Stores (BURL - Free Report) , also with a Zacks Rank #2, has a long-term earnings per share growth rate of 17%.

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