Can Lowe’s Come out ahead of Consensus Estimates in Fiscal 4Q16?



What to expect from Lowe’s in fiscal 4Q16 and 2016

The world’s second-largest home improvement retailer, Lowe’s Companies (LOW), is slated to release its fourth quarter and full-year earnings for fiscal 2016 on February 24. The company’s fiscal 4Q16 and fiscal 2016 ended on January 29, 2016.

Lowe’s expectations for the quarter are upbeat, and consensus Wall Street analyst estimates project adjusted EPS (earnings per share) of $0.59 in fiscal 4Q16, which would be a YoY (year-over-year) increase of 27.6%. Lowe’s beat the market consensus for EPS in 3Q16 but came short of expectations in fiscal 1Q16 and 2Q16.

That said, Lowe’s results over the past several quarters have been backed by strong tailwinds from an improving US economy. As a cyclical stock, the retailer has benefited from rising consumer employment and incomes as well as from the recovering housing (XHB) (ITB) market.

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Strategic focus

Lowe’s is also undergoing several strategic changes, including several that were announced in fiscal 4Q16. Last month, Lowe’s announced its exit from its Australia joint venture as a way of sharpening its focus on more compelling investment opportunities. Earlier this month, Lowe’s announced it was purchasing Canadian home improvement retailer RONA for $2.3 billion. The purchase should help it expand its geographic presence in the country.

Lowe’s has also been focusing on smaller urban format stores via its Orchard Supply banner, as a way of expanding its presence and growing sales in high-density urban areas in the US—something rival Home Depot (HD) has been reluctant to do. Lowe’s focus on both organic and inorganic opportunities to grow its top line has also been contrary to the strategies employed by other industry players like Restoration Hardware (RH), Williams-Sonoma (WSM), and Pier 1 Imports (PIR), who’ve looked mostly at omnichannel investments to provide sales upsides.

Lowe’s and HD are S&P 500 Index components. Together, they constitute 1.3% of the holdings in the iShares Core S&P 500 ETF (IVV).

Keep reading this series for an in-depth analysis of Lowe’s performance in the first nine months of fiscal 2016, Wall Street revenue estimates, management guidance for 4Q16 and fiscal 2016, EPS growth expectations, and dividend policies.

Let’s begin with a review of Lowe’s fiscal 2016 performance so far.


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