Barron's Says Lowe's (LOW) Underperformance + Undervaluation = Great Buying Opportunity
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Price: $42.64 -0.12%
Overall Analyst Rating:
NEUTRAL (
Down)
Dividend Yield: 1.7%
EPS Growth %: +11.4%
Overall Analyst Rating:
NEUTRAL (
Down)Dividend Yield: 1.7%
EPS Growth %: +11.4%
Trade LOW Now!
Investors are buying Lowe's (NYSE: LOW) shares Wednesday following a bullish outlook made in Barron's late Tuesday night.
Barron's started by highlighting Lowe's first-quarter comps (up 2.6 percent) which were a step behind Home Depot's (NYSE: HD) (up 5.8 percent over the same period). Lowe's, however, is now streamlining ops with the implementation of better displays in stores and everyday low prices versus relying on promotional discounts. (Note: this strategy isn't panning out well for JCPenney (NYSE: JCP), but these are indeed two different sets of customers.)
The publication also pointed to Lowe's mobile app for when customers want nails or plywood, but are in a meeting (or on the lam, in some cases).
For the impatient investor, Lowe's recently boosted its quarterly payout to 14 cents for an annual yield of 2.1 percent. In addition, bounds of free cash flow are leading the company to repurchase billions in outstanding shares.
Being based out of Mooresville, N.C., most of Lowe's exposure lies in the Southern U.S. Otherwise, Barron's noted Lowe's has 300 stores in the Midwest, 200 in the Northeast, and 100 or so in California and Texas. International exposure is limited to Canada and Mexico. The company has slowed its store expansion plans to about 10 for fiscal 2012.
Analysts are currently looking for a 10 percent jump in earnings to $1.82 per share in 2012 and 12 percent pop to $2.23 for fiscal 2013.
Long-term EPS growth is expected at 15 percent; shares trade at about 14.5 times 2012 views and 11.9 times 2013 expectations. This is a discount to expectations for Home Depot shares, currently at 16.8 times and 14.8 times, respectively. The last five years have seen Lowe's trade with a 15.4 times multiple, compared with 15.8 times for Home Depot, meaning there's still some potential upside left there. Applying a 15.8 times multiple to 2012 expectations yields a share price of $28.76, about 7.1 percent better than the stock's current trading range.
Risks include dimmer housing data, as well as recent management changes ebbing growth as merchandising and operations functions are separated.
Shares are up 2.5 percent Wednesday morning.
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Barron's started by highlighting Lowe's first-quarter comps (up 2.6 percent) which were a step behind Home Depot's (NYSE: HD) (up 5.8 percent over the same period). Lowe's, however, is now streamlining ops with the implementation of better displays in stores and everyday low prices versus relying on promotional discounts. (Note: this strategy isn't panning out well for JCPenney (NYSE: JCP), but these are indeed two different sets of customers.)
The publication also pointed to Lowe's mobile app for when customers want nails or plywood, but are in a meeting (or on the lam, in some cases).
For the impatient investor, Lowe's recently boosted its quarterly payout to 14 cents for an annual yield of 2.1 percent. In addition, bounds of free cash flow are leading the company to repurchase billions in outstanding shares.
Being based out of Mooresville, N.C., most of Lowe's exposure lies in the Southern U.S. Otherwise, Barron's noted Lowe's has 300 stores in the Midwest, 200 in the Northeast, and 100 or so in California and Texas. International exposure is limited to Canada and Mexico. The company has slowed its store expansion plans to about 10 for fiscal 2012.
Analysts are currently looking for a 10 percent jump in earnings to $1.82 per share in 2012 and 12 percent pop to $2.23 for fiscal 2013.
Long-term EPS growth is expected at 15 percent; shares trade at about 14.5 times 2012 views and 11.9 times 2013 expectations. This is a discount to expectations for Home Depot shares, currently at 16.8 times and 14.8 times, respectively. The last five years have seen Lowe's trade with a 15.4 times multiple, compared with 15.8 times for Home Depot, meaning there's still some potential upside left there. Applying a 15.8 times multiple to 2012 expectations yields a share price of $28.76, about 7.1 percent better than the stock's current trading range.
Risks include dimmer housing data, as well as recent management changes ebbing growth as merchandising and operations functions are separated.
Shares are up 2.5 percent Wednesday morning.
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