Lowe’s Tops Q1 Expectations; Shares Dip

Lowe’s Companies Inc. (LOW) reported better-than-expected first-quarter results, backed by continued demand for home products. The home improvement company’s sales came in at $24.42 billion, up 24.1% year-over-year, surpassing the Street’s estimates of $23.46 billion. Earnings stood at $3.21 per share, up 81% year-over-year, and beat the Street’s estimates of $2.56 per share.

Lowe’s operates as a home improvement retailer in the United States, Canada, and Mexico, offering a line of products for construction, maintenance, repair, remodeling, and decorating.

Despite the strong results, shares of the company fell 1% to close at $190.72 on May 19, amid concerns about challenges in the housing market, such as high lumber prices.

Consolidated comparable sales were up 25.9% and U.S. comparable sales increased 24.4%.

By the end of the quarter, the company operated 1,972 retail stores in the United States and Canada, and serviced around 230 dealer-owned stores. (See Lowe’s stock analysis on TipRanks)

Commenting on the results, Marvin R. Ellison, Lowe’s president and CEO said, “Our outstanding performance continued this quarter, as we delivered strong sales growth and operating margin expansion. We delivered over 30% growth in Pro, over 18% growth in all 15 U.S. regions, and growth in Canada that outpaced the U.S… Looking forward, I remain confident in our ability to accelerate our market share gains while driving further improvement in operating margin.”

During the quarter, the company repurchased shares worth $3.1 billion and paid $440 million in dividends. The company’s current quarter sales are well ahead of its full-year 2021 guidance of $86 billion.

In April, Lowe’s completed the acquisition of the STAINMASTER brand, one of the most recognized carpet brands in the U.S., adding to the company’s portfolio of private brands.

Recently, Oppenheimer analyst Brian Nagel assigned a Buy rating to the stock with a price target of $235, which implies 23.2% upside potential to current levels.

Nagel said, “While we remain concerned with likely softening sales and earnings trends at the company, as COVID-19 tailwinds continue to abate, we now view LOW as particularly attractive versus shares of other leading hardlines chains, including Home Depot, given a discounted share valuation and still significant business model slack.”

Consensus among analysts is a Strong Buy based on 17 Buys and 3 Holds. The average analyst price target stands at $229.82 and implies upside potential of 20.5% to current levels. Shares have gained 18.9% year-to-date.

Lowe’s scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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