Lowe’s Update: Self-Improvement Taking Hold, Goldman Sachs Upgrades to Buy

LOW: Lowe's logo

A recent Goldman Sachs report has upgraded its rating for Lowe’s (NYSE:LOW), the U.S.’s second largest home-improvement retailer after Home Depot (NYSE:HD), from ‘Neutral’ to ‘Buy’ with a higher price target of $28, up from previous $26. The upgrade was in response to management’s continued efforts to reinvent its strategies from a new national re-branding campaign, to store upgrades and roll out of powerful online tools like ‘MyLowes’ to engage customers.

Lowe’s Self-Improvement Underway

The company finished its third quarter with better than expected sales, even though out-performed by Home Depot. In the third quarter, sales grew 2.3%, higher than expected 2%. It also raised its fiscal 2011 guidance to 2-3% from the previous 2%. The company’s management has been proactive with recent organizational restructuring and efficiency initiatives. It recently launched a new branding campaign and online tool “MyLowes” to boost web-sales. If these efforts translate into improved sales would definitely provide upside to Lowe’s stock value. In the next quarter, Lowe’s is targeting 8% sales growth, particularly through online sales. It may still suffer some margin compression.
It also presented at the 2011 Analyst and Investor Conference highlighting its strategic investments and critical decisions in 2011 and updates on its long-term financial targets. We have a revised $25.44 Trefis price estimate for Lowe’s Companies, at 5% premium to the current market price.