Stock Update (NYSE:LOW): Lowe’s Companies, Inc. Announces Second Quarter Sales and Earnings Results

Lowe’s Companies, Inc. (NYSE:LOW) reported net earnings of $1.2 billion for the quarter ended July 29, 2016, a 3.7 percent increase over the same period a year ago. Diluted earnings per share increased 9.2 percent to $1.31 from $1.20 in the second quarter of 2015. For the six months ended July 29, 2016, net earnings increased 14.0 percent from the same period a year ago to $2.1 billion, and diluted earnings per share increased 20.5 percent to $2.29.

The second quarter results include a loss on a foreign currency hedge entered into in advance of the company’s acquisition of RONA, inc. (RONA), which decreased pre-tax earnings for the second quarter by$84 million and diluted earnings per share by $0.06.  The six month period includes a net gain on the settlement of the foreign currency hedge, which increased pre-tax earnings by $76 million and diluted earnings per share by $0.05.

Sales for the second quarter increased 5.3 percent to $18.3 billion from $17.3 billion in the second quarter of 2015, and comparable sales increased 2.0 percent. For the six month period, sales were $33.5 billion, a 6.4 percent increase over the same period a year ago, and comparable sales increased 4.4 percent. Comparable sales for the U.S. home improvement business increased 1.9 percent for the second quarter and 4.4 percent for the six month period.

“We delivered solid results for the first half of the year, in line with our expectations,” commented Robert A. Niblock, Lowe’s chairman, president and CEO. “We believe we are well positioned to capitalize on a favorable macroeconomic backdrop for home improvement in the second half of this year as we continue to execute on our strategic priorities to provide better omni-channel experiences, deepen our relationships with professional customers, and drive productivity and profitability.

“I would like to express my appreciation for our employees’ unwavering commitment to serving customers, enabling us to provide inspiration and support whenever and wherever they shop and positioning Lowe’s as the project authority in our industry,” Niblock added.  “We are also very pleased to welcome RONA’s talented team into the Lowe’s family following the completion of the acquisition on May 20, 2016.”

Delivering on its commitment to return excess cash to shareholders, the company repurchased $1.2 billionof stock under its share repurchase program and paid $251 million in dividends in the second quarter. For the six month period, the company repurchased $2.4 billion of stock under its share repurchase program and paid $506 million in dividends.

As of July 29, 2016, Lowe’s operated 2,108 home improvement and hardware stores in the United States,Canada and Mexico representing 211.9 million square feet of retail selling space.

Lowe’s Business Outlook

The company is updating its Fiscal Year 2016 Business Outlook to reflect the impact of the acquisition of RONA, which was completed in May 2016.  There have been no other changes to the Business Outlook presented below.

Fiscal Year 2016 — a 53-week Year (comparisons to fiscal year 2015 — a 52-week year; based on U.S. GAAP unless otherwise noted)

  • Total sales are expected to increase approximately 10 percent, including the 53rd week
  • The 53rd week is expected to increase total sales by approximately 1.5 percent
  • Comparable sales are expected to increase approximately 4 percent
  • The company expects to add approximately 45 home improvement and hardware stores.
  • Earnings before interest and taxes as a percentage of sales (operating margin) are expected to increase approximately 50 basis points.1
  • The effective income tax rate is expected to be approximately 38.1%.
  • Diluted earnings per share of approximately $4.06 are expected for the fiscal year ending February 3, 2017.

1 Operating margin growth excludes the net gain on the settlement of the foreign currency hedge entered into in advance of the company’s acquisition of RONA, as well as the impact of the non-cash impairment charge the company recognized in the fourth quarter of 2015 in connection with its decision to exit its joint venture with Woolworths Limited in Australia. (Original Source)

Shares of Lowe’s Companies are down nearly 4% to $77.91 in pre-market trading. LOW has a 1-year high of $83.65 and a 1-year low of $62.62. The stock’s 50-day moving average is $81.02 and its 200-day moving average is $75.79.

On the ratings front, LOW has been the subject of a number of recent research reports. In a report issued on August 15, J.P. Morgan analyst Christopher Horvers maintained a Buy rating on LOW, with a price target of $89, which implies an upside of 9.2% from current levels. Separately, on August 12, Oppenheimer’s Brian Nagel reiterated a Buy rating on the stock and has a price target of $94.

According to, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Christopher Horvers and Brian Nagel have a total average return of 8.8% and 5.9% respectively. Horvers has a success rate of 66.7% and is ranked #373 out of 4124 analysts, while Nagel has a success rate of 58.6% and is ranked #200.

The street is mostly Bullish on LOW stock. Out of 14 analysts who cover the stock, 12 suggest a Buy rating and 2 recommend to Hold the stock. The 12-month average price target assigned to the stock is $89.70, which represents a potential upside of 10.1% from where the stock is currently trading.

Lowe’s Cos., Inc. is engaged in the retail sale of home improvement products. The company offers products for maintenance, repair, remodeling, home decorating and property maintenance. It also offers home improvement products in the following categories: appliances, bathroom, building supply, electrical, flooring, hardware, paint, kitchen, plumbing, lighting & fans, outdoor living, windows and doors. The company was founded in 1946 and is headquartered in Mooresville, NC.

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