Collins Stewart Starts Lowe's (LOW) at Neutral; Structural Changes Are Step In Right Direction, But Lag HD
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Price: $218.47 +0.11%
Rating Summary:
26 Buy, 21 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
26 Buy, 21 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Collins Stewart initiates coverage on Lowe's (NYSE: LOW) with a Neutral. PT $26.00.
Collins analyst says, "Lowe’s reported consecutive increases in Q2 and Q3; however, Q3 marked the tenth straight quarter LOW’s SSS growth trailed Home Depot (NYSE: HD). Sales in some core categories have improved, but big-ticket items continued to trend lower. Traffic increased at LOW in Q3, but the average ticket was flat. Transactions greater than $500 declined 0.8% on a comparable basis, suggesting consumers remain cautious when making costly home improvement purchases. LOW has begun a company-wide revamp, which includes the closure of 27 underperforming stores, a merchandising reorganization, a shift from promotional pricing and costing to EDLP, and in-store and online upgrades in an effort to win back shoppers. We will be slow to judge these initiatives, as HD’s execution improvements create a difficult competitive dynamic. We look for an anemic sales recovery in FY12. Based on our FY12 estimates, LOW trades at a slight discount to HD, which we view as justified by the continued SSS underperformance and the margin expansion potential we believe HD’s recent infrastructure investments present."
"We don’t see any immediate catalysts to drive upside to consensus. LOW’s guided for full-year EPS of $1.57-$1.60 excluding $0.20 in charges related to store closings and discontinued projects. Our estimate of $1.60 is $0.01 below consensus. For FY12, we look for EPS of $1.78, in-line with consensus."
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 $25.02 yesterday.
Collins analyst says, "Lowe’s reported consecutive increases in Q2 and Q3; however, Q3 marked the tenth straight quarter LOW’s SSS growth trailed Home Depot (NYSE: HD). Sales in some core categories have improved, but big-ticket items continued to trend lower. Traffic increased at LOW in Q3, but the average ticket was flat. Transactions greater than $500 declined 0.8% on a comparable basis, suggesting consumers remain cautious when making costly home improvement purchases. LOW has begun a company-wide revamp, which includes the closure of 27 underperforming stores, a merchandising reorganization, a shift from promotional pricing and costing to EDLP, and in-store and online upgrades in an effort to win back shoppers. We will be slow to judge these initiatives, as HD’s execution improvements create a difficult competitive dynamic. We look for an anemic sales recovery in FY12. Based on our FY12 estimates, LOW trades at a slight discount to HD, which we view as justified by the continued SSS underperformance and the margin expansion potential we believe HD’s recent infrastructure investments present."
"We don’t see any immediate catalysts to drive upside to consensus. LOW’s guided for full-year EPS of $1.57-$1.60 excluding $0.20 in charges related to store closings and discontinued projects. Our estimate of $1.60 is $0.01 below consensus. For FY12, we look for EPS of $1.78, in-line with consensus."
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 $25.02 yesterday.
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