Lowe’s (LOW) Q3 Earnings Growth Expected: Should You Care?

in EARNINGS/INVESTING IDEAS by

Lowe’s Companies, Inc. (NYSE:LOW) is scheduled to report Q3 earnings results on November 20, 2019, at 9:00 AM EST. The company is expected to report earnings of $1.35/share on revenue of $17.729 billion.

The consensus earnings per share (EPS) of $1.35/share is based on a poll of 29 analysts and represents a growth of 29.8% over the same quarter last year when the company reported earnings of $1.04/share. The revenue forecast of $17.729 billion based on a poll of 25 analysts implies a year-over-year (YoY) growth of 1.8%. Last year the company reported $17.415 billion in revenue for the quarter.

Expected to report EPS growth of $0.31/share for Q3, 2019
Metric Expected Prior Year YoY Change
Revenue $17,728.68 $17,415.00 1.8%
EPS $1.35 $1.04 29.8%

The company’s competitor¬†Home Depot (NYSE:HD)¬†reported earnings today and missed on sales forecast. Some analysts like GlobalData Retail are attributing Home Depot’s miss in part due to Lowe’s resurgence. Nevertheless, Lowe’s stock price is also down -1.65% ahead of the earnings call. While Lowe’s has been able to grow sales, it has sacrificed gross profit margins, a justifiable cause for concern.

Lowes Revenue Gross Margin

Earnings Call Trends

Historically, management has exceeded analyst expectations 5 out of the last 8 tracked quarters, and missed expectations 3 quarters. What are your expectations from Lowe’s for earnings this quarter? Let us know in the comments!

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $2 $2.15 7.4% Beat
Q1, 2020 $1.32 $1.22 -7.6% Missed
Q4, 2019 $0.79 $0.80 1.3% Beat
Q3, 2019 $0.98 $1.04 6.1% Beat
Q2, 2019 $2.02 $2.07 2.5% Beat
Q1, 2019 $1.22 $1.19 -2.1% Missed
Q4, 2018 $0.88 $0.74 -15.9% Missed
Q3, 2018 $1.02 $1.05 2.8% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending August 2, 2019, the stock price reacted by increasing by 10.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-21 $97.87 $108.16 10.5% Increase
2019-05-22 $111.10 $94.80 -14.7% Decline
2019-02-27 $105.03 $105.09 0.1% Increase
2018-11-20 $91.35 $88.37 -3.3% Decline

Fundamentals And Technical Analysis

Lowe’s is currently trading at $113.09/share, down -1.7% for the day. The company is trading at approximately 95.7% of its 52-week high of $118.23/share. The company’s stock price is up 15.6% since the last earnings report and up 0.6% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 65.37 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 35.0x and a forward P/E multiple of 19.9x.

Lowe’s current share price also implies a price-to-book (P/B) multiple of 33.5x. The following table summarizes some other key fundamental ratios:

Data as of November 19, 2019
Metric Value
Last Fiscal Period FY2020.Q2
Period End Date August 2, 2019
Stock Price (Current) $113.09
P/E Ratio 35.0x
P/E Ratio (Fwd) 19.9x
PEG Ratio 1.7
Total Debt to Capital (%) 20.0%
Levered Free Cash Flow $2.832 billion
Enterprise Value / EBITDA 14.6x

Company Profile: Lowe’s Companies, Inc.

Lowe’s Companies, Inc. is a large-cap stock with a market capitalization of $88.772 billion and a total enterprise value of $108.8 billion. The company operates in the Consumer Discretionary sector and Specialty Retail industry. Lowe’s Companies, Inc., together with its subsidiaries, operates as a home improvement retailer in the United States, Canada, and Mexico.

The company offers a line of products for construction, maintenance, repair, remodeling, and decorating. It provides home improvement products in various categories, such as lumber and building materials, appliances, seasonal and outdoor living, tools and hardware, fashion fixtures, rough plumbing and electrical, paint, millwork, lawn and garden, flooring, and kitchens. It also offers installation services through independent contractors in various product categories; extended protection plans; and in-warranty and out-of-warranty repair services. The company sells its national brand-name merchandise and private branded products to homeowners, renters, and professional customers.

As of February 1, 2019, it operated 2,015 home improvement and hardware stores. The company also sells its products through online sites comprising Lowes.com and Lowesforpros.com; and through mobile applications. Lowe’s Companies, Inc. was founded in 1946 and is based in Mooresville, North Carolina.

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