Lowe's Cos. (LOW): RONA Should Be Accretive in 2Q - UBS

August 11, 2016 8:41 AM EDT
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Price: $70.98 --0%

Rating Summary:
    15 Buy, 12 Hold, 0 Sell

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UBS analyst, Michael Lasser, reiterated his Buy rating on shares of Lowe's (NYSE: LOW) along with his price target of $88.00 noting that the RONA deal is likely to be accretive to 2Q results.

LOW closed on its acquisition of RONA on May 20, so the Canadian retailer's financials should have a significant bearing on LOW's 2Q results. Herein, we lay out our combined estimates. For Lowe's, we model a 4.0% comp in 2Q, which is in-line with the cons. est. In addition, we forecast RONA will contribute an additional ~$780 mm in sales for the 70 days of 2Q since the deal closed. This equates to sales growth of 3.7% for RONA in the period after adjusting for FX. This is essentially in-line with the 3.4% adj. sales growth it experienced in 1Q. On our math, we expect the deal to be LSD accretive in the first year prior to closing (in-line with LOW's commentary), before accelerating to MSD accretion in year 2.

For an analyst ratings summary and ratings history on Lowe's click here. For more ratings news on Lowe's click here.

Shares of Lowe's closed at $80.98 yesterday.

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