UBS Raises Price Target on Lowe's Cos. (LOW) to $80 Ahead of Analyst Day
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UBS reiterated a Buy rating on Lowe's Cos. (NYSE: LOW), and raised the price target to $80.00 (from $77.00), ahead of the company's analyst day. After experiencing slower SSS & earnings growth over the last couple of Qs, UBS thinks that LOW will explain how it plans to reinvigorate its core biz. The company may also release details on how it plans to drive further sales gains through improved customer engagement, along with targeted promotions & marketing.
Analyst Michael Lasser commented, "While the event could take several different paths, it will most likely highlight the progress LOW has made & the potential it has. Most likely, the meeting will allow the co. to recalibrate the market’s expectations as the home improvement cycle moves into the next phase. Currently, the FY'17 cons. forecast for LOW of $4.56 trails its prior LT target of $4.70. The shortcoming is a result of slower top-line growth (avg. FY'15-FY'17E comp of 3.8% vs. ~4.0% outlook) & less margin expansion than forecasted (core FY'17 OM of ~10.7% vs. 11.0% outlook). Lowe’s still has numerous ways to drive EPS growth including cost cutting, RONA accretion, pro customer penetration, market share gains, & others. But, we think it will be mindful of macro factors & the need to set achievable goals. Thus, it's likely to guide to a 3%-3.5% comp for the next few years. This could put EPS below its prior expectations for next year. Yet, we believe this has already been priced in by the market as its forward multiple is -14% below its 3-yr avg & trades at an -8% discount to the S&P (vs. its 3-yr avg of a 24% premium)."
Shares of Lowe's closed at $70.71 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst PT Change
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