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Lowe's Stock Breaks 52-Week Record: Buy, Hold or Take Profits?
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Lowe's Companies, Inc. (LOW - Free Report) reached a new 52-week high of $268.71 on Friday, a significant milestone that has caught investors’ attention. The company's ongoing strategic initiatives and favorable economic conditions set a positive tone for its performance. The Federal Reserve's recent 50-basis point interest rate cut has injected further optimism. With the stock trading near its peak, investors are faced with the question: How should they play Lowe’s ahead?
Lowe’s stock has exhibited an uptrend since Sept. 18, when the Federal Reserve announced its first rate cut in four years. Following this announcement, shares of Lowe’s have risen by 4%, mirroring the performance of its close competitor, The Home Depot, Inc. (HD - Free Report) . Meanwhile, other housing-related stocks, such as Tecnoglass (TGLS - Free Report) , saw a rise of 2.9%, while Builders FirstSource (BLDR - Free Report) experienced a slight decline of 0.1%.
Over the past month, Lowe’s stock has risen 7.5%, slightly trailing the industry’s growth of 8%. Nevertheless, it has outperformed the broader Retail and Wholesale sector and the S&P 500 index, which posted respective gains of 5.8% and 1.7%.
Image Source: Zacks Investment Research
Technical indicators support Lowe’s strong performance. The stock currently trades above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability. This technical strength reflects positive market sentiment and growing confidence in LOW’s prospects.
Image Source: Zacks Investment Research
Lowe’s Leverages Market Trends and Technology for Growth
Lowe's continues to demonstrate resilience in the professional (Pro) segment, posting mid-single-digit comparable sales growth in this category during the second quarter of fiscal 2024. This growth is notable, given the challenges within the Do-It-Yourself (DIY) space, reflecting Lowe's focus on meeting the unique needs of its Pro customers. The company has transformed its product and service offerings to cater to this high-demand customer base. Pro customers represent a more consistent revenue stream due to the nature of their work, requiring frequent and large-scale purchases.
Another key driver of Lowe's performance is its “Total Home” strategy, which aims to enhance customer engagement across both Pro and DIY markets. This strategy emphasizes Lowe’s omnichannel initiatives, improving online sales through initiatives like same-day delivery services. In the last reported quarter, the company achieved 2.9% growth in online sales. Lowe’s digital transformation is pivotal for its long-term growth, especially as consumers increasingly shift toward online shopping for home improvement needs.
Lowe’s is leveraging technology to maintain its competitive edge. The company has partnered with Apple to enable customers to design and visualize their dream kitchens through the use of Apple Vision Pro. Lowe’s collaborations with Palantir and NVIDIA focus on AI initiatives that integrate advanced technologies into operations. The introduction of AI and virtual reality technologies could provide Lowe’s with a long-term competitive edge, attracting tech-savvy consumers.
In light of the Federal Reserve's recent interest rate cut, Lowe's stands to benefit as lower borrowing costs can stimulate consumer spending on home improvement projects. With rising home prices and an increasing number of aging homes, homeowners are more inclined to renovate their existing properties rather than purchase new ones. This trend, combined with the work-from-home culture and growing millennial homeownership, creates a sustained demand for home upgrades.
Lowe’s Battles DIY Weakness and Competition
A significant portion of Lowe's revenues comes from the DIY segment, but recent softness in this area has weighed on the overall sales performance. In the second quarter of fiscal 2024, Lowe’s reported net sales of $23.6 billion, a 5.5% decline from the same period last year. The drop in DIY spending suggests a broader consumer shift, as many are prioritizing essential expenditures over home improvement projects.
Cautious spending behavior has become more apparent, with consumers delaying big-ticket purchases, such as flooring, kitchen and bath products. This shift contributed to a 5.1% decrease in comparable sales during the quarter. Underlying inflationary pressures have led to more conservative consumer spending on major renovation projects that typically drive higher sales volumes and profitability for Lowe's.
Competition within the home improvement sector remains fierce. Rivals like Home Depot continuously innovate and expand their offerings. Lowe's may find it challenging to maintain or grow its market share if competitors launch aggressive pricing strategies. While Lowe's is investing in its Total Home strategy, the necessity to differentiate in a crowded market can place additional pressure on margins.
On its last earnings call, Lowe’s revised its outlook and now anticipates total sales between $82.7 billion and $83.2 billion, down from the prior estimate of $84-$85 billion. Comparable sales are expected to decline by 3.5% to 4% compared to the previous forecast of a 2% to 3% drop. The company has also adjusted its operating margin projection to 12.4%-12.5%, slightly lower than the previously guided range of 12.6%-12.7%. Adjusted earnings per share are now expected to fall between $11.70 and $11.90, down from the earlier forecast of $12.00 to $12.30.
How Consensus Estimates Stack Up for Lowe’s
Reflecting a more cautious outlook for Lowe’s, the Zacks Consensus Estimate for earnings per share has experienced downward revisions. Over the past 60 days, analysts have lowered their estimates for the current and next fiscal year by 2.6% to $11.91 and 4.8% to $12.80 per share, respectively.
Image Source: Zacks Investment Research
Is LOW Stock Still Attractive After Recent Price Spike?
From a valuation standpoint, Lowe’s remains appealing even after its recent price spike. The stock is trading at a discount compared to both the industry benchmark and the broader S&P 500. Lowe’s has a forward 12-month price-to-earnings (P/E) ratio of 21.37, which is lower than the industry average of 23.41 and also below the S&P 500’s forward P/E ratio of 21.98. Lowe’s boasts a Value Score of A, underscoring its attractiveness for value-focused investors seeking exposure in the sector.
Image Source: Zacks Investment Research
Final Verdict on Lowe’s: Stay the Course or Harvest Gains?
Lowe's recent 52-week high underscores its resilience in a tough retail environment, with key drivers like its Pro segment growth and digital advancement fueling optimism. However, headwinds, including a softened DIY market and downwardly revised guidance, may temper enthusiasm. For long-term investors, Lowe’s remains a solid hold, given its strategic initiatives and relative valuation discount. However, those with a risk-averse mindset might consider taking profits. Lowe’s currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Lowe's Stock Breaks 52-Week Record: Buy, Hold or Take Profits?
Lowe's Companies, Inc. (LOW - Free Report) reached a new 52-week high of $268.71 on Friday, a significant milestone that has caught investors’ attention. The company's ongoing strategic initiatives and favorable economic conditions set a positive tone for its performance. The Federal Reserve's recent 50-basis point interest rate cut has injected further optimism. With the stock trading near its peak, investors are faced with the question: How should they play Lowe’s ahead?
Lowe’s stock has exhibited an uptrend since Sept. 18, when the Federal Reserve announced its first rate cut in four years. Following this announcement, shares of Lowe’s have risen by 4%, mirroring the performance of its close competitor, The Home Depot, Inc. (HD - Free Report) . Meanwhile, other housing-related stocks, such as Tecnoglass (TGLS - Free Report) , saw a rise of 2.9%, while Builders FirstSource (BLDR - Free Report) experienced a slight decline of 0.1%.
Over the past month, Lowe’s stock has risen 7.5%, slightly trailing the industry’s growth of 8%. Nevertheless, it has outperformed the broader Retail and Wholesale sector and the S&P 500 index, which posted respective gains of 5.8% and 1.7%.
Image Source: Zacks Investment Research
Technical indicators support Lowe’s strong performance. The stock currently trades above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability. This technical strength reflects positive market sentiment and growing confidence in LOW’s prospects.
Image Source: Zacks Investment Research
Lowe’s Leverages Market Trends and Technology for Growth
Lowe's continues to demonstrate resilience in the professional (Pro) segment, posting mid-single-digit comparable sales growth in this category during the second quarter of fiscal 2024. This growth is notable, given the challenges within the Do-It-Yourself (DIY) space, reflecting Lowe's focus on meeting the unique needs of its Pro customers. The company has transformed its product and service offerings to cater to this high-demand customer base. Pro customers represent a more consistent revenue stream due to the nature of their work, requiring frequent and large-scale purchases.
Another key driver of Lowe's performance is its “Total Home” strategy, which aims to enhance customer engagement across both Pro and DIY markets. This strategy emphasizes Lowe’s omnichannel initiatives, improving online sales through initiatives like same-day delivery services. In the last reported quarter, the company achieved 2.9% growth in online sales. Lowe’s digital transformation is pivotal for its long-term growth, especially as consumers increasingly shift toward online shopping for home improvement needs.
Lowe’s is leveraging technology to maintain its competitive edge. The company has partnered with Apple to enable customers to design and visualize their dream kitchens through the use of Apple Vision Pro. Lowe’s collaborations with Palantir and NVIDIA focus on AI initiatives that integrate advanced technologies into operations. The introduction of AI and virtual reality technologies could provide Lowe’s with a long-term competitive edge, attracting tech-savvy consumers.
In light of the Federal Reserve's recent interest rate cut, Lowe's stands to benefit as lower borrowing costs can stimulate consumer spending on home improvement projects. With rising home prices and an increasing number of aging homes, homeowners are more inclined to renovate their existing properties rather than purchase new ones. This trend, combined with the work-from-home culture and growing millennial homeownership, creates a sustained demand for home upgrades.
Lowe’s Battles DIY Weakness and Competition
A significant portion of Lowe's revenues comes from the DIY segment, but recent softness in this area has weighed on the overall sales performance. In the second quarter of fiscal 2024, Lowe’s reported net sales of $23.6 billion, a 5.5% decline from the same period last year. The drop in DIY spending suggests a broader consumer shift, as many are prioritizing essential expenditures over home improvement projects.
Cautious spending behavior has become more apparent, with consumers delaying big-ticket purchases, such as flooring, kitchen and bath products. This shift contributed to a 5.1% decrease in comparable sales during the quarter. Underlying inflationary pressures have led to more conservative consumer spending on major renovation projects that typically drive higher sales volumes and profitability for Lowe's.
Competition within the home improvement sector remains fierce. Rivals like Home Depot continuously innovate and expand their offerings. Lowe's may find it challenging to maintain or grow its market share if competitors launch aggressive pricing strategies. While Lowe's is investing in its Total Home strategy, the necessity to differentiate in a crowded market can place additional pressure on margins.
On its last earnings call, Lowe’s revised its outlook and now anticipates total sales between $82.7 billion and $83.2 billion, down from the prior estimate of $84-$85 billion. Comparable sales are expected to decline by 3.5% to 4% compared to the previous forecast of a 2% to 3% drop. The company has also adjusted its operating margin projection to 12.4%-12.5%, slightly lower than the previously guided range of 12.6%-12.7%. Adjusted earnings per share are now expected to fall between $11.70 and $11.90, down from the earlier forecast of $12.00 to $12.30.
How Consensus Estimates Stack Up for Lowe’s
Reflecting a more cautious outlook for Lowe’s, the Zacks Consensus Estimate for earnings per share has experienced downward revisions. Over the past 60 days, analysts have lowered their estimates for the current and next fiscal year by 2.6% to $11.91 and 4.8% to $12.80 per share, respectively.
Image Source: Zacks Investment Research
Is LOW Stock Still Attractive After Recent Price Spike?
From a valuation standpoint, Lowe’s remains appealing even after its recent price spike. The stock is trading at a discount compared to both the industry benchmark and the broader S&P 500. Lowe’s has a forward 12-month price-to-earnings (P/E) ratio of 21.37, which is lower than the industry average of 23.41 and also below the S&P 500’s forward P/E ratio of 21.98. Lowe’s boasts a Value Score of A, underscoring its attractiveness for value-focused investors seeking exposure in the sector.
Image Source: Zacks Investment Research
Final Verdict on Lowe’s: Stay the Course or Harvest Gains?
Lowe's recent 52-week high underscores its resilience in a tough retail environment, with key drivers like its Pro segment growth and digital advancement fueling optimism. However, headwinds, including a softened DIY market and downwardly revised guidance, may temper enthusiasm. For long-term investors, Lowe’s remains a solid hold, given its strategic initiatives and relative valuation discount. However, those with a risk-averse mindset might consider taking profits. Lowe’s currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.