Lowe's Cos. (LOW): RONA Should Be Accretive in 2Q - UBS
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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.
Shares of Lowe's closed at $80.98 yesterday.
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