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What to Expect from Lowe’s 3Q17 Earnings

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Part 3
What to Expect from Lowe’s 3Q17 Earnings PART 3 OF 5

Will Lowe’s Outperform Analysts’ Earnings per Share Estimates?

3Q17 estimates

Analysts are expecting Lowe’s Companies (LOW) to post adjusted EPS (earnings per share) of $1.02, which represents growth of 15.9% from $0.88 in 3Q16. The rise in EPS is expected to be driven by revenue growth, the expansion of net margins, and share repurchases in the last four quarters.

Will Lowe&#8217;s Outperform Analysts’ Earnings per Share Estimates?

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Analysts are expecting Lowe’s net margins to improve from 4.9% in 3Q16 to 5.1% in 3Q17. The decline in SG&A (selling, general, and administrative) expenses and D&A (depreciation and amortization) expenses are expected to expand Lowe’s net margins. The SG&A expenses are expected to fall from 26.0% to 22.9% while D&A expenses are expected to fall from 2.6% to 2.3%.

From the beginning of 4Q16 until the end of 2Q17, the company repurchased 26.2 million shares for $2.05 billion. By the end of 2Q17, the company had $2.6 billion under its share repurchase program. Share repurchases reduce the number of shares outstanding, driving the company’s EPS.

Peer comparisons and outlook

During the same period, analysts are expecting Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) to post EPS growth of 13.8%, 6.3%, and -56.3%, respectively.

For 2017, Lowe’s management has set EPS guidance to a range of $4.20–$4.30, which represents growth in the range of 5.5%–8.0%. For the next four quarters, analysts expect Lowe’s to post EPS of $4.83, which represents growth of 11.3% from $4.34 in the corresponding four quarters of the previous year.

Dividends

On November 10, Lowe’s announced it would pay quarterly dividends of $0.41 per share at a yield of 2.1% and a payout ratio of 36.4%. The company plans to pay dividends on February 7, 2018, to shareholders of record on January 24, 2018.

Next, we’ll look at Lowe’s valuation multiple.

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