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Home Depot and Lowe's: Will There Be Momentum in 3Q17?

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Part 4
Home Depot and Lowe's: Will There Be Momentum in 3Q17? PART 4 OF 9

What to Expect from Home Depot and Lowe’s Revenue

Revenue estimates

In the next four quarters, analysts expect Home Depot’s (HD) revenue growth to outperform Lowe’s (LOW) revenue growth. During the same period, analysts expect Home Depot’s revenue to rise 5.1% from $97.36 billion in the same four quarters the previous year to $102.27 billion.

What to Expect from Home Depot and Lowe’s Revenue

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The revenue growth is expected to be driven by positive SSSG (same-store sales growth) and the addition of new stores. The company acquired Compact Power Equipment on July 6, 2017, for $265.0 million. Compact Power Equipment, which provides equipment rental and maintenance services, is also expected to contribute towards the revenue growth.

The growth in the repair and remodel market, the reemergence of first-time homebuyers, and faster appreciation of home prices along with recovery efforts after Hurricane Harvey and Hurricane Irma are expected to drive both companies’ revenues.

For 2017, the company’s management has set SSSG guidance of 5.5%. The SSSG is expected to be driven an enhanced customer experience with the next level of integration. Interline customers can make purchases at Home Depot stores using a swipe card that’s linked to the Interline account.

Lowe’s revenue estimates

For the next four quarters, analysts expect Lowe’s to post revenue of $69.81 billion—growth of 2.8% from $67.88 billion in the same four quarters the previous year.

The revenue growth is expected to be driven by the acquisition of Central Wholesalers and Maintenance Supply Headquarters, the addition of new stores, and positive SSSG. Lowe’s SSSG is expected to be driven by enhanced messaging on LowesForPros.com for pro customers, marketing campaigns, and increased awareness of the enhanced “Buy in Bulk” program.

In the international market, the continued integration of RONA—where the company is focusing on combining Lowe’s store experience, merchandising and brands with RONA’s strong pro offerings—is expected to improve Lowe’s sales.

For 2017, the company’s management expects to open 25 new stores, while its SSSG is expected to be at 5%.

Peer comparisons

During the same period, analysts expect Bed Bath & Beyond (BBBY) and Williams-Sonoma (WSM) to post revenue growth of 0.8% and 3.2%, respectively.

In the next part, we’ll discuss both companies’ 2Q17 margins.

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