What To Expect From Lowe’s Stock After Q1?

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Lowe's

Lowe’s (NYSE: LOW), a home-improvement retailer, is scheduled to report its fiscal first-quarter results on Wednesday, May 18. We expect the company’s stock to trade higher post-first-quarter results – as its revenues and earnings are likely to beat consensus estimates. The rise in home values is stimulating homeowners to make improvements to their homes, further fueling the demand for home improvement stores. In 2021, Lowe’s reported $96.3 billion in net sales, up 7.4% year-over-year (y-o-y). This was on top of an incredible showing in fiscal 2020 when revenue surged over 24%. That said, Lowe’s is not expected to repeat this performance in the future due to the anomalies of the Covid-19 pandemic. However, robust housing demands and healthy consumer balance sheets should help the company keep moving forward. The retailer’s management expects its revenue to range from $96 billion to $98 billion for the full year of fiscal 2022. The midpoint of that target would be revenue growth of less than 1% over 2021. Considering economies are opening and consumers are spending more time and money, it makes sense that the sales growth would moderate over time.

Our forecast indicates that Lowe’s valuation is $256 per share, which is almost 33% higher than the current market price. Look at our interactive dashboard analysis on Lowe‘s Earnings Preview: What To Expect in Q1? for more details.

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(1) Revenues expected to be slightly ahead of consensus estimates

Trefis estimates Lowe’s Q1 2022 revenues to be around $21.5 Bil, slightly ahead of the consensus estimate. In fiscal 2021, Lowe’s comparable sales grew 6.9% y-o-y. During the year, 11 of its 15 merchandising departments saw growth and prices increased, which contributed to an 11.1% increase in its average ticket size. However, a 4.2% decline in comparable transactions offset that growth. We now forecast Lowe’s Revenue to be $99 billion for fiscal 2022.

2) EPS likely to be well ahead of consensus estimates

LOW’s Q1 2022 earnings per share (EPS) is expected to be $1.83 per Trefis analysis, comfortably beating the consensus estimate of $1.71. Lowe’s boosted sales and controlling costs resulted in an expansion of its operating profit margin from 10.77% to 12.5% in fiscal 2021. That’s an impressive achievement, considering the inflationary pressures throughout economies worldwide. Further, Lowe’s was able to improve its net margin 230 basis points to 8.8%, resulting in a 55% growth in EPS to $12.04. In addition to a higher base and increased operating efficiency, a 6.8% reduction in its outstanding share count also contributed to this strong EPS growth.

(3) Stock price estimate higher than the current market price

Going by our Lowe’s Valuation, with an EPS estimate of around $13.55 and a P/E multiple of 18.9x in fiscal 2022, this translates into a price of $256, which is 33% higher than the current market price.

It is helpful to see how its peers stack up. LOW Peers shows how Lowe’s stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns May 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 LOW Return -2% -25% 174%
 S&P 500 Return -3% -16% 79%
 Trefis Multi-Strategy Portfolio -6% -22% 211%

[1] Month-to-date and year-to-date as of 5/16/2022
[2] Cumulative total returns since the end of 2016

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