Home Depot and Lowe’s Stocks: What Analysts Recommend
Share prices generally move in tandem with analyst recommendations. As analysts raise their next-12-month target prices, stock prices may also increase.
Investors should look at valuation multiples when they’re deciding whether to enter or exit a stock.
Dividends help smooth out return volatility for shareholders. This effect is more important for cyclical companies, including the home improvement sector.
In 4Q16, Home Depot (HD) posted a gross margin, EBITDA (earnings before interest, tax, depreciation, and amortization) margin, and net margin of 34.0%, 15.4%, and 7.9%, respectively.
Now that we’ve discussed revenue growth and profitability, let’s discuss EPS (earnings per share) growth for Home Depot (HD) and Lowe’s (LOW).
In 4Q16, Home Depot (HD) posted SSSG of 5.8% with growth in transactions contributing 2.8% while the rise in the average ticket size contributed 2.9%.
Analysts expect Home Depot (HD) to post revenue of $99.0 billion for 2017, a rise of 4.6% from its 2015 revenue of $94.6 billion.
In 4Q16, Home Depot (HD) posted revenues of $22.2 billion, an increase of 5.8% from $21.0 billion. During the same period, Lowe’s (LOW) revenue rose 19.3% to $15.8 billion.
In this series, we’ll look at the 4Q16 performance of Home Depot and Lowe’s in terms of key metrics and analyst estimates for the next four quarters.
With its macro factors looking stronger, Lowe’s management has set a positive outlook for 2017.
On March 2, Lowe’s stock was trading at $80.40. Analysts are expecting Lowe’s stock price to touch $85.69 in the next 12 months.
For 4Q16, Lowe’s (LOW) posted a gross margin, EBITDA margin, and net margin of 34.4%, 10.4%, and 4.2%, respectively.
Lowe’s 4Q16 EPS saw the negative impact of $0.06 due to charges associated with severance-related expenses.
For 4Q16, Lowe’s reported SSSG of 5.1%, with the rise in average check size contributing 4% and transaction growth contributing 1.1%.
Lowe’s (LOW) management is expecting its revenue to rise 5% in 2017.
For 4Q16, Lowe’s has reported revenues of $15.78 billion, which represents a growth of 19.3% from $13.23 billion in 4Q15.
Lowe’s (LOW) announced its 4Q16 earnings on March 1, 2017, reporting EPS of $0.74 on revenues of $15.8 billion.
On February 22, 2017, Home Depot (HD) stock was trading at $145.25. This price may have already factored in the estimates we’ve discussed in this series.
Home Depot’s better-than-expected 4Q16 earnings and positive outlook appear to have increased investors’ confidence, leading to a rise in the company’s stock price and PE.
Now that we’ve discussed Home Depot’s 4Q16 revenue, sources of revenue, and margins, let’s take a look at its 4Q16 EPS (earnings per share) and estimated EPS for 2017.