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Why Is Lowe's (LOW) Down 3.7% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Lowe's Companies, Inc. (LOW - Free Report) . Shares have lost about 3.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Lowe’s Misses on Q1 Earnings & Revenues
Lowe’s failed to carry the momentum of the final quarter of 2016 in to the first quarter of fiscal 2017. The company missed the Zacks Consensus Estimate for both earnings and sales.
The home improvement retailer posted adjusted earnings of $1.03 a share that missed the Zacks Consensus Estimate of $1.07 but improved 18.4% from $0.87 delivered in the year-ago quarter.
Net sales of $16,860 million came below of the Zacks Consensus Estimate of $17,037 million but increased 10.7% year over year. The company’s sales increase can be attributed to its efforts to provide a better omni-channel customer experience and an improvement in the housing market. Comparable sales (comps) increased 1.9% during the quarter, while comps for the U.S. business also increased by 2%.
Gross profit increased 8.7% year over year to $5,800 million, however, gross profit margin contracted roughly 64 basis points to 34.4%.
Other Financial Aspects
Lowe’s ended the quarter with cash and cash equivalents of $1,963 million, long-term debt (excluding current maturities) of $15,770 million and shareholders’ equity of $5,531 million.
During the quarter, the company kept its promise of returning surplus cash to stockholders as it repurchased shares worth $1.2 billion and distributed $304 million as dividends.
Outlook
Management projects total sales growth of approximately 5% and comps to increase about 3.5% during fiscal 2017. Lowe’s envisions operating margin to increase approximately 120 basis points in the fiscal year.
The company now anticipates fiscal 2017 earnings to be approximately $4.30 per share, down from the previous estimate of $4.64 but up significantly from $3.99 posted in fiscal 2016. The decline in earnings guidance is due to loss on extinguishment of debt and lower interest expense.
Moreover, the company intends to open 35 home improvement and hardware stores during fiscal 2017. As of May 5, 2017, the company operated 2,137 stores in the U.S., Canada and Mexico.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.
At this time, Lowe's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. The stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the stock is suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Why Is Lowe's (LOW) Down 3.7% Since the Last Earnings Report?
It has been about a month since the last earnings report for Lowe's Companies, Inc. (LOW - Free Report) . Shares have lost about 3.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Lowe’s Misses on Q1 Earnings & Revenues
Lowe’s failed to carry the momentum of the final quarter of 2016 in to the first quarter of fiscal 2017. The company missed the Zacks Consensus Estimate for both earnings and sales.
The home improvement retailer posted adjusted earnings of $1.03 a share that missed the Zacks Consensus Estimate of $1.07 but improved 18.4% from $0.87 delivered in the year-ago quarter.
Net sales of $16,860 million came below of the Zacks Consensus Estimate of $17,037 million but increased 10.7% year over year. The company’s sales increase can be attributed to its efforts to provide a better omni-channel customer experience and an improvement in the housing market. Comparable sales (comps) increased 1.9% during the quarter, while comps for the U.S. business also increased by 2%.
Gross profit increased 8.7% year over year to $5,800 million, however, gross profit margin contracted roughly 64 basis points to 34.4%.
Other Financial Aspects
Lowe’s ended the quarter with cash and cash equivalents of $1,963 million, long-term debt (excluding current maturities) of $15,770 million and shareholders’ equity of $5,531 million.
During the quarter, the company kept its promise of returning surplus cash to stockholders as it repurchased shares worth $1.2 billion and distributed $304 million as dividends.
Outlook
Management projects total sales growth of approximately 5% and comps to increase about 3.5% during fiscal 2017. Lowe’s envisions operating margin to increase approximately 120 basis points in the fiscal year.
The company now anticipates fiscal 2017 earnings to be approximately $4.30 per share, down from the previous estimate of $4.64 but up significantly from $3.99 posted in fiscal 2016. The decline in earnings guidance is due to loss on extinguishment of debt and lower interest expense.
Moreover, the company intends to open 35 home improvement and hardware stores during fiscal 2017. As of May 5, 2017, the company operated 2,137 stores in the U.S., Canada and Mexico.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to one lower.
Lowe's Companies, Inc. Price and Consensus
Lowe's Companies, Inc. Price and Consensus | Lowe's Companies, Inc. Quote
VGM Scores
At this time, Lowe's stock has a great Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. The stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'A'. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks' style scores indicate that the stock is suitable for value and growth investors.
Outlook
Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.