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Lowe's (LOW) Q4 Earnings Beat Estimates, Revenues Miss

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Lowe’s Companies, Inc. (LOW - Free Report) came up with fourth-quarter fiscal 2019 results, which marks the third straight quarter of an earnings beat but the second consecutive revenue miss. The company provided disappointing earnings forecast for fiscal 2020.

Q4 in Detail

Adjusted earnings of 94 cents a share exceeded the Zacks Consensus Estimate of 91 cents and increased 17.5% year over year. Better process execution, cost containment efforts and improving gross margin contributed to the bottom line.

Net sales of $16.03 billion grew 2.4% year over year but fell short of the Zacks Consensus Estimate of $16.15 billion. Notably, comparable sales increased 2.5% during the quarter under review. Again, comparable sales for the U.S. home improvement business rose 2.6% in the quarter, following an increase of 3% in the preceding quarter.

Lowe’s is impressed with its U.S. home improvement stores’ performance. This was backed by investments in technology and strength in the Pro business. Also, the company remains on track to enhance e-commerce platform and accelerate Lowes.com sales. Management highlighted that the company remains well positioned to capitalize on sturdy demand in a home improvement market.

Gross profit grew 1.7% year over year to $4,981 million, while gross margin contracted 22 basis points to 31.1%.

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

Other Financial Aspects

Lowe’s ended the quarter with cash and cash equivalents of $716 million, long-term debt (excluding current maturities) of $16,768 million and shareholders’ equity of $1,972 million.

The company generated cash flow from operations of $4,296 million in the 12 months ended Jan 31, 2020. In the reported quarter, Lowe’s repurchased shares worth $670 million and distributed $423 million as dividends.

The company ended the quarter with 1,977 home improvement and hardware stores across the United States and Canada.

Outlook

Management envisions total sales growth of about 2.5-3% for fiscal 2020. This suggests total sales between $73.95 billion and $74.31 billion for the fiscal year. The given projection is lower than the current Zacks Consensus Estimate of $74.47 billion.

Lowe’s anticipates comparable sales growth of roughly 3-3.5%. Additionally, management forecast adjusted operating income growth of approximately 8-12% with adjusted operating margin expected to expand 50-70 basis points in fiscal 2020.

Management envisions adjusted earnings between $6.45 and $6.65 per share for the fiscal year, which is below the current Zacks Consensus Estimate of $6.69.

Stock Price Performance

This Zacks Rank #3 (Hold) stock has gained 11.8% in the past six months compared with the industry’s growth of 10%.

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