Lowe's (LOW) Pops on Better Than Feared Results, Analyst Praises Expense Control

August 17, 2022 8:56 AM EDT
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Shares of Lowe’s (NYSE: LOW) are up about 2% after the home improvement retailer reported mixed Q2 results.

LOW reported an adjusted EPS of $4.67 on revenue of $27.48 billion, which compares to the consensus that called for an adjusted EPS of $4.61 on revenue of $28.13 billion. Comparable sales came in at -0.3%, again lower than the consensus of +2.34%.

“I am pleased that our team drove operating margin improvement and effectively managed inventory despite lower-than-expected sales -- a clear reflection of our relentless focus on operating discipline and productivity,” commented Marvin Ellison, Lowe’s chairman, president and CEO.

On a full-year basis, Lowe’s sees EPS at the top end of its range of $13.10 to $13.60, while comp sales are expected at the bottom end of a -1% to +1% range. The operating margin is also seen near the top end of the guidance - 12.8% to 13%.

“Despite continued macro uncertainty, we remain confident in the long-term strength of the home improvement market and our ability to take share,” Ellison added.

Evercore ISI analyst Greg Melich said the results show that LOW did really well on expense control.

“Lowe’s had a worse 2Q comp than expected, comping -0.3%, but delivered on margin enhancement despite the negative comp. The comp guide for 2022 suggests that comps are slightly positive in the 2H, with additional guidance that operating margins can improve 40bps yoy to ~13.0% with gross margins up slightly,” Melich wrote in a research note.

Morgan Stanley analyst Simeon Gutman said that reaffirmed guidance “against lower end of sales range means "raised” profit outlook for 2H.”

“Q2 earnings and the full year outlook were decent in absolute senses and solid vs. lowered market expectations,” the analyst added.

By Senad Karaahmetovic

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