Up 4% This Year, Will Q1 Results Drive Lowe’s Stock Higher?

+5.90%
Upside
227
Market
240
Trefis
LOW: Lowe's logo
LOW
Lowe's

Lowe’s (NYSE: LOW), a home-improvement retailer, is scheduled to report its fiscal first-quarter results on Tuesday, May 21. We expect the company’s stock to likely see little to no movement with revenue and earnings matching market expectations in the fiscal first quarter. Its customer mix disproportionately impacted Lowe’s results 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. High interest rates affecting the robust housing market also negatively impacted the company in 2023. For the full year 2024, the retailer expects total sales of approximately $84 billion to $85 billion, comparable sales to be down -2% to -3%, and adjusted operating margin in the range of 12.6% to 13.7%. In addition, the company’s diluted earnings per share is expected to fall in the range of $12.00 to $12.30 in FY 2024.

LOW stock has seen extremely strong gains of 45% from levels of $160 in early January 2021 to around $230 now, vs. an increase of about 40% 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 $240 per share, which is nearly in line with 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 line with the consensus estimates

Trefis estimates Lowe’s Q1 2024 revenues to be around $21.2 Bil, in line with the consensus estimate. In Q4, the company’s revenue fell 17% year-over-year (y-o-y) to $18.6 billion. For the fourth quarter, the retailer’s comparable sales decreased 6.2%, indicating a slowdown in DIY demand and unfavorable January winter weather. Pro customer comparable sales were flat for the quarter. The company’s gross margin came in at 32.4% (up 10 basis points) in Q4 and the operating margin was 9.7% in Q4 2023 compared to 7.6% a year earlier. Lowe’s posted $86.3 billion in sales for fiscal 2023, marking a notable 12.4% decrease from the $97.1 billion achieved in fiscal 2022. We now forecast Lowe’s Revenue to be about $85 billion for fiscal 2024, down 2% y-o-y.

2) EPS likely to match consensus estimates

LOW’s Q1 2024 earnings per share (EPS) is expected to be $2.94 per Trefis analysis, matching the consensus estimate. Lowe’s generated net earnings of $1.02 billion in Q4, or $1.77 per share –  up from $957 million, or $1.58 per share in the prior-year quarter.

(3) Stock price estimate aligns with the current market price

Going by our Lowe’s Valuation, with an EPS estimate of around $12.20 and a P/E multiple of 19.7x in fiscal 2024, this translates into a price of $240, almost in line with 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 May 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 LOW Return 2% 4% 227%
 S&P 500 Return 5% 11% 137%
 Trefis Reinforced Value Portfolio 6% 6% 650%

[1] Returns as of 5/17/2024
[2] Cumulative total returns since the end of 2016

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