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Why Is Lowe's (LOW) Up 11.9% Since Last Earnings Report?
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A month has gone by since the last earnings report for Lowe's (LOW - Free Report) . Shares have added about 11.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lowe's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lowe's Q3 Earnings Beat Estimates, Sales Fall Y/Y
Lowe’s posted mixed results in third-quarter fiscal 2023, with the top line missing the Zacks Consensus Estimate while the bottom line beat the same. However, both sales and earnings fell from the previous fiscal year’s quarterly readings.
Quarter in Detail
Adjusted earnings per share (EPS) of $3.06 surpassed the Zacks Consensus Estimate of earnings of $3.05 per share but dipped 6.4% from the third-quarter fiscal 2022 tally.
Net sales of $20,471 million decreased 12.8% year over year and came below the consensus estimate of $20,974 million. Comparable sales (comps) fell 7.4% in the quarter under review, driven by lower DIY discretionary spending, partly offset by Pro customer comps. We had projected a comps decline of 4% for the quarter under discussion.
Gross profit slipped 11.9% year over year to $6,891 million, while the gross margin increased 36 basis points (bps) to 33.7%. We had expected a gross margin expansion of 10 bps year over year. Operating income amounted to $2,696 million, up from $924 million recorded in the year-earlier quarter. Also, the operating margin expanded to 13.2% from the year-earlier quarter’s reported figure of 3.9%.
Other Financial Aspects & Developments
LOW ended the quarter with cash and cash equivalents of $1,210 million, long-term debt (excluding current maturities) of $35,374 million and shareholders’ deficit of $15,147 million.
Lowe’s generated cash flow from operations of $7,032 million for the nine months of fiscal 2023. Capital expenditures amounted to $1,344 million for the aforementioned period. For fiscal 2023, LOW expects a capex of up to $2 billion.
In the reported quarter, Lowe’s bought back 7.3 million shares for $1.6 billion and paid out dividends of $642 million.
Outlook
For fiscal 2023, management revised the outlook on weaker-than-expected DIY sales. LOW now projects revenues of $86 billion versus $87-$89 million expected earlier and $97.1 billion delivered in fiscal 2022.
Comparable sales in fiscal 2023 are envisioned to be down 5% year over year versus the previous guided range of -2% to -4%. The adjusted operating margin is expected to be 13.3% compared with the earlier prediction of 13.4-13.6%. Management anticipates EPS of $13.00 versus the earlier forecast of $13.20-$13.60 for the fiscal year and $13.89 per share earned in fiscal 2022. It envisions an adjusted effective tax rate of about 25%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -12.2% due to these changes.
VGM Scores
At this time, Lowe's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lowe's has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Lowe's belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Home Depot (HD - Free Report) , has gained 12.8% over the past month. More than a month has passed since the company reported results for the quarter ended October 2023.
Home Depot reported revenues of $37.71 billion in the last reported quarter, representing a year-over-year change of -3%. EPS of $3.81 for the same period compares with $4.24 a year ago.
For the current quarter, Home Depot is expected to post earnings of $2.75 per share, indicating a change of -16.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
Home Depot has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Why Is Lowe's (LOW) Up 11.9% Since Last Earnings Report?
A month has gone by since the last earnings report for Lowe's (LOW - Free Report) . Shares have added about 11.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Lowe's due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Lowe's Q3 Earnings Beat Estimates, Sales Fall Y/Y
Lowe’s posted mixed results in third-quarter fiscal 2023, with the top line missing the Zacks Consensus Estimate while the bottom line beat the same. However, both sales and earnings fell from the previous fiscal year’s quarterly readings.
Quarter in Detail
Adjusted earnings per share (EPS) of $3.06 surpassed the Zacks Consensus Estimate of earnings of $3.05 per share but dipped 6.4% from the third-quarter fiscal 2022 tally.
Net sales of $20,471 million decreased 12.8% year over year and came below the consensus estimate of $20,974 million. Comparable sales (comps) fell 7.4% in the quarter under review, driven by lower DIY discretionary spending, partly offset by Pro customer comps. We had projected a comps decline of 4% for the quarter under discussion.
Gross profit slipped 11.9% year over year to $6,891 million, while the gross margin increased 36 basis points (bps) to 33.7%. We had expected a gross margin expansion of 10 bps year over year. Operating income amounted to $2,696 million, up from $924 million recorded in the year-earlier quarter. Also, the operating margin expanded to 13.2% from the year-earlier quarter’s reported figure of 3.9%.
Other Financial Aspects & Developments
LOW ended the quarter with cash and cash equivalents of $1,210 million, long-term debt (excluding current maturities) of $35,374 million and shareholders’ deficit of $15,147 million.
Lowe’s generated cash flow from operations of $7,032 million for the nine months of fiscal 2023. Capital expenditures amounted to $1,344 million for the aforementioned period. For fiscal 2023, LOW expects a capex of up to $2 billion.
In the reported quarter, Lowe’s bought back 7.3 million shares for $1.6 billion and paid out dividends of $642 million.
Outlook
For fiscal 2023, management revised the outlook on weaker-than-expected DIY sales. LOW now projects revenues of $86 billion versus $87-$89 million expected earlier and $97.1 billion delivered in fiscal 2022.
Comparable sales in fiscal 2023 are envisioned to be down 5% year over year versus the previous guided range of -2% to -4%. The adjusted operating margin is expected to be 13.3% compared with the earlier prediction of 13.4-13.6%. Management anticipates EPS of $13.00 versus the earlier forecast of $13.20-$13.60 for the fiscal year and $13.89 per share earned in fiscal 2022. It envisions an adjusted effective tax rate of about 25%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -12.2% due to these changes.
VGM Scores
At this time, Lowe's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lowe's has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Lowe's belongs to the Zacks Building Products - Retail industry. Another stock from the same industry, Home Depot (HD - Free Report) , has gained 12.8% over the past month. More than a month has passed since the company reported results for the quarter ended October 2023.
Home Depot reported revenues of $37.71 billion in the last reported quarter, representing a year-over-year change of -3%. EPS of $3.81 for the same period compares with $4.24 a year ago.
For the current quarter, Home Depot is expected to post earnings of $2.75 per share, indicating a change of -16.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.2% over the last 30 days.
Home Depot has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.