Will Lowe’s Stock Trade Lower Post Q2?

LOW: Lowe's logo

Lowe’s (NYSE: LOW), a home-improvement retailer, is scheduled to report its fiscal second-quarter results on Tuesday, August 22. We expect the company’s stock to trade lower post-second-quarter results – as its revenue is likely to miss and earnings almost match the consensus estimates. Its customer mix disproportionately impacted Lowe’s results in Q1. The do-it-yourself customer was less eager to spend on remodels and upgrades compared to last year, in part thanks to short-term issues like weather and inflation. The home improvement retailer also lowered its outlook for 2023. For the full year, the company tempered total sales forecasts to a range of $87 billion to $89 billion from a prior $88 billion to $90 billion. Comparable sales are expected to be down 2% to 4%, also revised downward from a previous guide of flat to down 2%.

Our forecast indicates that Lowe’s valuation is $203 per share, which is nearly 8% lower than the current market price. Look at our interactive dashboard analysis on Lowe‘s Earnings Preview: What To Expect in Q2? for more details.

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Notably, LOW stock had a Sharpe Ratio of 0.6 since early 2017, which is similar to the figure of 0.6 for the S&P 500 Index over the same period. Compare this with the Sharpe of 1.2 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

(1) Revenues expected to be slightly below consensus estimates

Trefis estimates Lowe’s Q2 2023 revenues to be around $24.7 Bil, slightly below the consensus estimate. In Q1, the company’s revenue fell 6% year-over-year (y-o-y) to $22.3 billion. In a challenging macroeconomic environment, Lowe’s comparable sales decreased 4.3%, steeper than the 3.28% drop expected on the Street. The company blamed lumber deflation, unfavorable weather, and lower DIY discretionary sales for the decline. We now forecast Lowe’s Revenue to be about $89 billion for fiscal 2023.

2) EPS likely to match consensus estimates

LOW’s Q2 2023 earnings per share (EPS) is expected to be $4.45 per Trefis analysis, almost matching the consensus estimate of $4.49. Its Q1 adjusted earnings grew 5% y-o-y to $3.67.

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

Going by our Lowe’s Valuation, with an EPS estimate of around $13.65 and a P/E multiple of 14.9x in fiscal 2023, this translates into a price of $203, almost 8% lower than the current market price.

Check out how other Lowe’s Peers fare on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

Returns Aug 2023
MTD [1]
YTD [1]
Total [2]
 LOW Return -6% 10% 208%
 S&P 500 Return -5% 14% 95%
 Trefis Reinforced Value Portfolio -7% 28% 553%

[1] Month-to-date and year-to-date as of 8/21/2023
[2] Cumulative total returns since the end of 2016

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