Lowe’s (NYSE: LOW ), the home improvement retailer, is scheduled to report its fiscal third quarter results on Tuesday, November 21st. We expect the company’s stock to see little movement after its third-quarter results — with revenue and earnings expected to be near consensus estimates. Its customer mix disproportionately impacted Lowe’s results in the first half of fiscal 2023. The DIY customer was less eager to spend on remodeling and upgrades than last year, thanks in part to near-term issues like weather and inflation. Looking ahead, the home improvement retailer expects full-year 2023 total sales of approximately $87 billion to $89 billion, comparable sales to decline -2% to -4%, and adjusted operating margin in the range of 13.4% to 13.6%.
LOW stock has shown strong gains of 30% from $160 levels in early January 2021 to about $205 now, versus a gain of about 20% for the S&P 500 over that roughly 3-year period. However, the increase in LOW stocks is far from permanent. The stock returned 61% in 2021, -23% in 2022 and 3% in 2023 (YTD). By comparison, the S&P 500 returned 27% in 2021, -19% in 2022 and 18% in 2023 (year-to-date) – indicating that LOW underperformed the S&P in 2022 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – it’s been tough in recent years for individual stocks; to heavyweights in the consumer discretionary sector including AMZN, TSLA and TM, and even 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 every year during the same period. Why so? As a group, HQ Portfolio stocks provide better returns with less risk than the benchmark; less of a rollercoaster ride as evidenced by HQ’s portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, LOW may face a similar situation as in 2022 and 2023 and underperformed the S&P over the next 12 months – or will you see a sharp spike?
Our estimate puts Lowe’s valuation at $203 per share, which is roughly in line with the current market price. Check out our interactive dashboard analysis LFrweRevenue preview of: What to expect in Q3? For more information.
(1) Revenues expected to match consensus estimates
Trefis estimates Lowe’s Q3 2023 earnings at about $20.96 It was, which almost matches the consensus estimate. In the second quarter, the company’s revenue fell 9% year-over-year (year-over-year) to $24.96 billion. Lowe’s comparable sales fell 1.6% in the second quarter of 2023 with a strong spring recovery and growth in Pro and online sales, partially offsetting lumber deflation and lower DIY discretionary demand. Still, that was better than the 4.3% decline the company saw in Q1 2023. We now forecast Lowe’s income to be around $89 billion in fiscal 2023, down 9% year over year.
2) EPS is likely to match consensus estimates
LOW’s Q3 2023 earnings per share (EPS) is expected to be $3.04 per Trefis analysis, which is roughly in line with the consensus estimate. Its second-quarter adjusted earnings fell 2.4% year over year to $4.56. Despite a significant reduction in share count from the share repurchase program, Q2 net margin was impacted by a slower decline in selling, general and administrative expenses. Because of this, EPS declined during the quarter, albeit at a slower rate than net sales.
(3) Valuation of stock price similar to current market price
Passing by ours Lowe’s assessmentwith an EPS estimate of around $13.65 and a P/E ratio of 14.9x in fiscal 2023, this translates into a price of $203, almost in line with the current market price.
See how others Lowe’s peers rate on metrics that matter. You will find other useful comparisons for companies from different industries at Comparative comparisons.
| Returns | November 2023 MTD [1] |
2023 YTD [1] |
2017-23 Total [2] |
| LOW Return | 7% | 3% | 188% |
| S&P 500 Returns | 7% | 17% | 101% |
| Trefis Value Enhanced Portfolio | 7% | 26% | 549% |
[1] From the month to date and from the beginning of the year as of 11/16/2023
[2] Cumulative total return since the end of 2016