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Lowe's: Investors Are Confident before Its 1Q17 Earnings

PART:
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Part 4
Lowe's: Investors Are Confident before Its 1Q17 Earnings PART 4 OF 7

Why Are Analysts Optimistic about Lowe’s 1Q17 Earnings?

Earnings per share

So far in this series, we looked at Lowe’s (LOW) estimated revenue, sources of revenue, and margins for 1Q17. In this series, we’ll look at analysts’ earnings estimate for 1Q17.

Why Are Analysts Optimistic about Lowe&#8217;s 1Q17 Earnings?

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1Q17 estimates

In 1Q17, analysts expect Lowe’s to post EPS (earnings per share) of $1.06, which represents growth of 21.8% from $0.87 in 1Q16. The EPS is expected to be driven by revenue growth, expansion of net margins, and share repurchases in the last 12 months. Share repurchases reduce the number of shares outstanding and boost the company’s EPS. We’ll discuss share repurchases in more detail in the next part.

From the above graph, you can see that the company outperformed analysts’ estimate twice. When this happens, the share price tends to rise. On March 1, 2017, the company’s stock rose 9.5% due to an announcement of better-than-expected 4Q16 earnings.

Peer comparisons

In 1Q17, analysts expect Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) to post EPS growth of 11.8%, -8.2%, and -17.2%, respectively.

Outlook

For 2017, the company’s management set the EPS guidance at $4.64—growth of 16.3% from $3.98 in 2016. Analysts expect the company to post EPS of $4.65—year-over-year growth of 16.8%. Analysts expect EPS growth to be driven by revenue growth, expansion of net margins, and share repurchases.

Next, we’ll look at Lowe’s dividend policy.

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