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Why Are Analysts Optimistic about Lowe’s Companies?

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Dec. 4 2020, Updated 10:52 a.m. ET

Stock performance

Despite posting lower-than-expected 3Q16 earnings on November 16, 2016, Lowe’s Companies (LOW) stock is on the rise. On January 30, 2017, the company’s stock was trading at $73.57, which represents a rise of 9.8% since the announcement of its 3Q16 earnings.

In November 2016, the Federal Housing Administration announced that in 3Q16, the housing price index rose 1.5%. The rise in house prices could encourage homeowners to remodel and upgrade their houses, which could boost home improvement retailer sales.

The improving US economy appears to have increased investors’ confidence, leading to a rise in Lowe’s stock price. In December 2016, the unemployment rate fell to 4.7%, while average hourly labor wages rose to $26.

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On January 27, 2017, Lowe’s stock received another boost after its management announced the approval of a new $5 billion repurchase program. The new authorization, which does not have an expiration date, will add to the previous repurchase program. At the end of 3Q16, the company had $627 million in its repurchase program.

Year-to-date performance

Lowe’s had a tough year in 2016. The lower-than-expected same-store sales growth in 2Q16 and 3Q16 had led to a decline in its stock price. In 2016, the company’s stock fell 5.5%. Year-to-date, the company’s stock price has increased 3.4%.

During the same period, Lowe’s peers Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) returned 3.3%, -1.7%, and -1.6%, respectively.

Comparatively, since the beginning of 2016, the SPDR S&P Homebuilders ETF (XHB), the broader comparative index, has returned 2.4%. XHB invests more than 19.5% of its holdings in home improvement retailers.

Next, we’ll look at what analysts recommend for Lowe’s Companies.

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