Stock of the Day

September 6, 2022

Lowe's Companies (LOW)

$227.48
-$0.91 (-0.4%)
Market Cap: $127.32B

About Lowe's Companies

Lowe's Companies, Inc., together with its subsidiaries, operates as a home improvement retailer in the United States. The company offers a line of products for construction, maintenance, repair, remodeling, and decorating. It also provides home improvement products, such as appliances, seasonal and outdoor living, lawn and garden, lumber, kitchens and bath, tools, paint, millwork, hardware, flooring, rough plumbing, building materials, décor, and electrical. In addition, the company offers installation services through independent contractors in various product categories; and extended protection plans and repair services. It sells its national brand-name merchandise and private brand products to professional customers, homeowners, renters, businesses, and government. The company also sells its products through Lowes.com website; and through mobile applications. Lowe's Companies, Inc. was founded in 1921 and is based in Mooresville, North Carolina.

Lowe's Companies Bull Case

Here are some ways that investors could benefit from investing in Lowe's Companies, Inc.:

  • The company recently reported earnings per share of $2.92, exceeding analysts' expectations, which indicates strong financial performance.
  • Lowe's Companies, Inc. has increased its quarterly dividend to $1.20 per share, reflecting a commitment to returning value to shareholders.
  • The stock is currently trading around $224, which may present a buying opportunity for investors looking for value in the home improvement sector.
  • Analysts have a consensus rating of "Moderate Buy" for the stock, suggesting positive sentiment and potential for price appreciation.
  • The company has a market capitalization of approximately $125.93 billion, indicating its significant presence and stability in the market.

Lowe's Companies Bear Case

Investors should be bearish about investing in Lowe's Companies, Inc. for these reasons:

  • The company's revenue has decreased by 2.0% year-over-year, which may signal challenges in maintaining growth.
  • Lowe's Companies, Inc. has a negative return on equity of 47.55%, indicating that the company is not generating profit effectively from its equity base.
  • Recent analyst price targets have been lowered, suggesting a cautious outlook on the stock's future performance.
  • Despite the dividend increase, the payout ratio is around 39.77%, which may limit future dividend growth potential.
  • Market volatility could impact the stock price, as evidenced by fluctuations in trading volume and price movements.

The Retail Sector: Winners And Losers From Q2 Earnings 

Written By Thomas Hughes on 8/30/2022

The Retail Sector: Winners And Losers From Q2 Earnings 

The earnings reports from within the retail sector (NYSEARCA: XRT) were very mixed for Q2 but one thing is clear. The companies with great branding, healthy eCommerce profiles, the right demographics, and solid execution are outperforming peers and the group as a whole. Williams-Sonoma (NYSE: WSM) stands out in this light because the specialty home-goods retailer targets a higher-end clientele and not only outperformed on the top and bottom lines but was able to reiterate its long-term guidance. 

The Big Box Stores: Target (NYSE: TGT) and Walmart (NYSE: WMT) sent a ripple of fear through the entire industry when they warned about margin compression and discounting earlier in the summer. Both of their Q2 earnings reports confirmed the weakness but there was a difference. Target’s results were mixed relative to the Marketbeat.com consensus figures while Walmart outperformed by a slim margin. The real takeaways, however, are that revenue and earnings are being impacted by rising inventories and increased discounting and the guidance was tepid in both cases. In regard to the inventory, both companies grew their inventory by 25% to 35% YOY despite the inventory-reducing activities that led to the 2nd quarter weakness so there is still a risk of discounting and margin compression in the back half of the year. In conclusion, the big box stores are sure to see steady or rising sales but will struggle with earnings. 

Home Improvement Stores: Results from Lowes (NYSE: LOW) and Home Depot (NYSE: HD) prove that home improvement trends are still strong. The difference here is that Home Depot had a stronger Q2 but provided a weaker outlook while Lowe’s had a more-tepid Q2 and provided a healthier outlook. The reason is the sales mix, Home Depot has greater exposure to the Pro channels and those channels are weakening. Both companies scored a round of price target increases from the analysts but Lowe’s appears to be in the better position

Dollar Stores: The dollar stores Dollar General (NYSE: DG) and Dollar Tree (NASDAQ: DLTR) both reported solid high-single-digit growth versus last year but there is a clear difference here as well. While the group is set up well for the economic environment Dollar Tree is struggling versus its competitor and provided a softer outlook for the second half of the year. The mitigating factor is that Dollar Tree is reinvesting in growth and profitability so it should do well over the long term. In the near term, Dollar General not only bought back shares and paid a dividend but it increased the buyback authorization while Dollar Tree did none of those things.

Membership Outlets: Membership outlets came into the spotlight with Walmart’s results and Sam’s Club segment is what may set it apart from Target this year. Sam’s Club led Walmart’s growth and is underpinning the outlook with a roughly 10% increase in membership and membership at record highs. This news was compounded by strong results and an outlook from BJ’s Wholesale Club (NYSE: BJ) that points to similar strength for Costco (NYSE: COST) next month when it reports. The bottom line, inflation is pushing folks to look for bargains and plenty of bargains can be found at membership club warehouses. Pricesmart is the outlier, however, because it is struggling with supply chain issues that are amplified by its coverage territory. 

The Discount Stores: The discount stores should be in great shape and they are set up to outperform but there is a problem. Inflation is cutting into their traffic just like everybody else and they are suffering from inventory bloat as well. Increased discounting from front-line merchants is also putting pressure on margins so The TJX Companies (NYSE: TJX) and Ross Stores (NASDAQ: ROST) did not perform as well as they could have and both provided soft guidance as well. Ollies Bargain Outlet (NASDAQ: OLLI) reports later this week and could disappoint the market although it looks like soft results are getting priced into the market ahead of the release. 

The Retail Sector: Winners And Losers From Q2 Earnings 

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