Up 17% Since 2023, What’s Next For Lowe’s Stock Post Q4 Results?

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Lowe's

Lowe’s (NYSE: LOW), a home-improvement retailer, is scheduled to report its fiscal fourth-quarter results on Tuesday, February 27. We expect the company’s stock to trade lower post-fourth-quarter results – as its revenue and earnings are expected to miss the consensus estimates. Its customer mix disproportionately impacted Lowe’s results so far in 2023. The do-it-yourself (DIY) customer was less eager to spend on remodels and upgrades than in FY’22, partly thanks to short-term issues like weather and inflation. The home improvement retailer trimmed its annual forecasts based on lower-than-expected DIY sales in Q3. For the full year 2023, the retailer expects comparable sales to decline 5%, compared to a -2% to -4% decrease earlier. Overall sales are estimated to be around $86 billion. The company also expects adjusted EPS of $13.00 for the year, down from $13.20 to $13.60 previously.

LOW stock has seen extremely strong gains of 45% from levels of $160 in early January 2021 to current levels now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. However, the increase in LOW stock has been far from consistent. Returns for the stock were 61% in 2021, -23% in 2022, and 12% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that LOW underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and TM, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could LOW face a similar situation as it did in 2022 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Lowe’s valuation is $201 per share, which is nearly 14% lower than the current market price. Look at our interactive dashboard analysis on Lowe‘s Earnings Preview: What To Expect in Q4? for more details.

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(1) Revenues expected to come in below the consensus estimates

Trefis estimates Lowe’s Q4 2023 revenues to be around $17.3 Bil, below the consensus estimate. In Q3, the company’s revenue fell 13% year-over-year (y-o-y) to $20.5 billion. Lowe’s comparable sales fell 7.4% in Q3 2023, due to a decline in DIY discretionary spending, partially offset by positive Pro customer comp sales. We now forecast Lowe’s Revenue to be about $86 billion for fiscal 2023, down 11% y-o-y.

2) EPS likely to miss consensus estimates

LOW’s Q4 2023 earnings per share (EPS) is expected to be $1.64 per Trefis analysis, marginally missing the consensus estimate. Lowe’s generated net earnings of $1.8 billion in Q3, or $3.06 per share –  up from $154 million, or a mere 25 cents per share in the prior-year quarter.

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

Going by our Lowe’s Valuation, with an EPS estimate of around $13.05 and a P/E multiple of 15.4x in fiscal 2023, this translates into a price of $201, almost 14% 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 Feb 2024
MTD [1]
Since start
of 2023 [1]
2017-24
Total [2]
 LOW Return 9% 17% 227%
 S&P 500 Return 5% 33% 127%
 Trefis Reinforced Value Portfolio 3% 41% 625%

[1] Returns as of 2/26/2024
[2] Cumulative total returns since the end of 2016

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