Lowe’s Companies (LOW), which operates a chain of retail home improvement stores, is all set to announce its 3Q16 earnings on November 16, 2016, before the market opens.
Since the announcement of 2Q16 earnings on August 17, 2016, Lowe’s share price has fallen 9.3%. Analysts were expecting the company to post EPS (earnings per share) of $1.42 on revenues of $18.4 billion. However, it posted EPS of $1.37 on revenue of $18.3 billion. After the 2Q16 earnings release, Lowe’s management lowered the EPS guidance for fiscal 2016 from $4.11 to $4.06. These factors made investors skeptical about investing in Lowe’s, which led to a fall in the stock price.
Although the housing market is showing improvement, fears of an interest rate hike and a slowdown in the US economy have led to falling share prices for home improvement companies. Since the beginning of 2016, LOW’s stock has fallen 7.4%. During the same period, peers Home Depot (HD), Bed Bath & Beyond (BBBY), and Williams-Sonoma (WSM) have returned -0.9%, -9.4%, and -9.3%, respectively.
The broader comparative index, the SPDR S&P Homebuilders ETF (XHB), has returned -0.8% since the beginning of 2016. XHB has more than 17% of its holdings invested in home improvement retailers like LOW, HD, and Bed Bath & Beyond.
In this series, we’ll explore what investors can expect from LOW’s 3Q16 earnings release. We’ll discuss analysts’ revenue and EPS estimates. We’ll also look at the company’s valuation multiples and its expected stock price over the next 12 months.
Let’s start by discussing LOW’s 3Q16 revenue.