What’s Next for Lowe’s Stock After An Upbeat Q4?

Lowe’s (NYSE: LOW) shares have surged 5% over the past week, outpacing the S&P 500 index’s 0.8% decline. The home-improvement retailer’s stock performance also eclipsed that of its peer, Home Depot stock (NYSE: HD), which gained 4% during the same period. See Is Home Depot Stock A Buy After Q4 Earnings? Lowe’s recent momentum follows its Q4 earnings report, where the company topped Wall Street expectations with sales of $18.6 billion and earnings of $1.99 per share. Notably, the retailer also achieved a 0.2% increase in comparable sales, breaking an eight-quarter streak of declines and surpassing analyst forecasts of a 1.8% drop.

Lowe’s customer mix has disproportionately impacted Lowe’s results since 2023. The do-it-yourself (DIY) customer has been less eager to spend on remodels and upgrades. The persistent decline in demand for larger discretionary DIY projects in Q4 was somewhat alleviated by increased sales driven by rebuilding efforts following hurricanes Milton and Helene, and strong showings in the professional and online channels. It should be noted that the sales from DIY customers account for roughly 70% of Lowe’s sales. Separately, if you want upside with a smoother ride than an individual stock, consider the High Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Image by Steve Buissinne from Pixabay

Lowe’s has navigated a challenging landscape in recent years, as the housing market has slowed due to rising interest rates. The Federal Reserve’s aggressive rate hikes (until September 2024 when it announced its three consecutive rate cuts) since 2022 aimed to combat inflation, resulted in higher mortgage rates that suppressed home sales. Although mortgage rates have begun to trend downward, reaching 6.76% as of February 27, they remain a significant factor in the market. The disparity between current borrowing costs and the lower rates existing homeowners enjoy has created a “lock-in effect,” where homeowners are reluctant to sell and purchase new properties. This reduced market activity has impacted Lowe’s. Despite these challenges, homeowners will likely continue to invest in maintaining their properties, providing a potential source of stability for Lowe’s.

The increase in LOW stock over the last 4-year period has been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 63% in 2021, -21% in 2022, 14% in 2023, and 13% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last 4-year 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.

Lowe’s has issued its financial guidance for fiscal year 2025, projecting total sales to range from $83.5 billion to $84.5 billion. This estimate suggests a potential increase from the company’s fiscal 2024 revenue of $83.67 billion. The company anticipates modest growth in comparable sales, with a projected increase of 0% to 1% y-o-y. Additionally, Lowe’s expects its operating margin to be between 12.3% and 12.4% in fiscal 2025, a slight decrease from the 12.5% margin achieved in fiscal 2024. Earnings per share are expected to fall within a range of $12.15 to $12.40, slightly below the fiscal 2024 EPS of $12.23.

We have revised Lowe’s Valuation to $253 per share, based on a $12.39 expected EPS and a 20.4x P/E multiple for the fiscal year 2025 – almost in line (as of March 2) with the current market price. We forecast Lowe’s Revenue to be $84.7 billion for the fiscal year 2025, marginally up y-o-y.

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.

[1] Returns as of 3/3/2025
[2] Cumulative total returns since the end of 2016