VALUATION HIGHLIGHTS

1. Lowe's constitute 100% of the Trefis price estimate for Lowe's's stock.

WHAT HAS CHANGED?

1. Lowe's Q4 Snapshot

Lowe's reported a mixed but broadly stable set of results for Q4 FY2025, with revenue of about $20.6 billion and adjusted EPS of $1.98 coming in ahead of expectations, supported by modest comparable sales growth of 1.3%. Performance was driven primarily by strength in the Pro segment, online channels, and home services, partially offset by continued softness in DIY discretionary demand amid a still-challenging housing backdrop. While adjusted earnings showed slight growth, GAAP EPS declined year over year due to acquisition-related costs, pointing to some underlying pressure on profitability. Margins also saw mild compression, reflecting cost pressures and a mix shift toward lower-margin Pro sales.

Note: Lowe's FY'25 ended on January 31, 2026.

2. Full Year 2026 Guidance

Lowe's guided to a cautious but stable FY2026 outlook, reflecting ongoing uncertainty in the home improvement cycle rather than a sharp recovery. The company expects revenue of $92–94 billion, implying a solid headline increase (partly acquisition-driven), but underlying comparable sales are guided to just flat to +2%, highlighting still-muted organic demand. Adjusted EPS is projected at $12.25–12.75, broadly in line with expectations.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Lowe's EBITDA Margin: From 2019-2021, Lowe's improved margins from 11.6% to 15.3% by streamlining its operations, supply chain, and cutting down heavily on its SG&A expenses. However, this value was down to 13.3% in 2022, due to the rampant inflation before again growing to 16.3% in 2023. Productivity initiatives and lower transportation costs drove the margin increase for the year. However, the retailer's margins were down to 14.8% in 2024. Slower housing turnover and higher borrowing costs have kept some customers on the sidelines. In 2025, the figure declined to 14.3%. Margins declined due to a combination of structural mix shifts, cyclical demand weakness, and one-off costs.

BUSINESS SUMMARY

Lowe's is the world's second-largest retailer of home improvement products, after Home Depot. Through its 1,700 stores spread across the U.S.(having exited from Mexico and Canada), Lowe's offers a wide range of home improvement products and installation services to individual homeowners as well as professional builders. In addition to the physical stores, consumers can buy these products through the company's dedicated website.

Lowe's has deep penetration levels in the U.S. Lowe's main selling point is that it outshines its main competitor, Home Depot in terms of the in-store shopping experience for consumers. This has forced Home Depot to upgrade its store environment and provide better customer service. Also, Lowe's is more focused on the do-it-yourself niche while its main rival's sales are divided equally into pro sales and DIYs.

SOURCES OF VALUE

The U.S. home improvement retail segment remains the most significant contributor to Lowe's valuation, supported by its nationwide store footprint and broad product assortment.

Extensive Store Network and Brand Recognition

Lowe's operates a large network of stores across the U.S., enabling strong market penetration and convenient access for both DIY and Pro customers. Its brand recognition and scale support steady traffic and vendor relationships.

Pro Customer Expansion Strategy

The company's increasing focus on professional customers provides more predictable demand and higher ticket transactions. Investments in Pro services, supply chain, and product offerings are strengthening its competitive positioning despite near-term margin trade-offs.

KEY TRENDS

Housing Market and Interest Rate Sensitivity

Demand for home improvement products remains closely tied to housing activity and interest rates. Elevated mortgage rates have dampened DIY spending, and a sustained recovery in housing will be critical for accelerating growth.

Shift Toward Cash Flow Optimization

Lowe's is prioritizing disciplined capital allocation with relatively low capex and a focus on free cash flow generation. This supports shareholder returns through buybacks and dividends but reflects a cautious stance on near-term growth.

Pro Segment Driving Structural Mix Shift

The continued expansion of the Pro segment is reshaping Lowe's business mix. While this enhances revenue stability and repeat business, it also introduces margin pressure, making execution critical for long-term profitability improvement.