Lowe's (LOW) Stock Dips on 'Mixed' Results

May 18, 2022 9:12 AM EDT
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Price: $174.72 --0%

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    27 Buy, 15 Hold, 0 Sell

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Shares of Lowe’s (NYSE: LOW) are down over 3% in premarket trading Wednesday, even though the retailer reported better-than-expected Q1 EPS.

Lowe’s reported Q1 EPS of $3.51, up from $3.21 in the year-ago period and above the consensus estimates of $3.23 per share. Net sales came in at $23.66 billion in the quarter, down 3.1% YoY and just below the analyst expectations of $23.81 billion.

Q1 gross margin stood at 34%, compared to 33.3% in the year-ago period, and analyst estimates of 33.3%.

Looking ahead to full fiscal 2023, Lowe’s expects EPS in the range of $13.10 to $13.60, while analysts are looking for $13.42 per share. The company expects FY comparable sales growth between -1% and +1%, compared to the analyst expectations of +0.95%. Total sales are expected to range between $97 billion and $99 billion, compared to the consensus projection of $98.3 billion.

"Despite some increased uncertainty in the macro environment, we remain confident in the outlook for the home improvement market and our ability to deliver operating margin expansion in 2022,” the company said.

Wells Fargo analyst Zachary Fadem blamed a move lower in LOW shares on missed consensus comps.

“While LOW shares are -25% YTD (-14% SPX), we think a NT relief rally is going to prove more dicult on the back of HD's better-than-expected results & guidance increase yesterday (which raised the bar for LOW). But notably, we're mindful that LOW's Q2 could potentially see a bigger Spring/Outdoor lift vs. HD given its outsized exposure to Lawn & Garden in 1H. Further, positive comps & strong EBIT expansion are still on the table for LOW in Q2-Q4, and while the comp gap between HD/LOW widened in Q1 (to +620bps vs. +310bps in Q4), we still see a favorable risk/reward for LOW at these levels; especially considering clear evidence of structural margin improvement in Q1 and a likely conservative model for the rest of the year,” the analyst said.

Telsey Advisory Group analyst Joseph Feldman reflected more positively on LOW’s results than Fadem.

“Lowe's is not slowing the pace of its investments and remains focused on increasing its market share and improving sales productivity and operating efficiency. The company should continue to benefit from its Total Home strategy—1) focus on the Pro; 2) enhance digital; 3) improve installation services; 4) drive localization; and 5) elevate its assortment—and a solid home improvement backdrop for the next couple of years,” Feldman told clients in a note.

By Senad Karaahmetovic

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Wells Fargo, Senad Karaahmetovic