Why Are Analysts Favoring ‘Buy’ Recommendations for Lowe’s?



Analysts’ expectations

Analysts expect Lowe’s Companies (LOW) to post revenues of $62.4 billion in the next four quarters, which represents a growth of 8.6% from the corresponding quarters of the previous year. During the same period, its earnings per share (or EPS) are expected to rise 19.9% year-over-year to $4.50.

The increase in house prices, the improvement in the US economy, and the approval of the new share repurchase program appear to have increased analysts’ confidence. Analysts raised their price target for the next 12 months from $78.20 in November 2016 to $81.20. The new estimate represents a return potential of 10.4% from current levels.

The 12-month target prices for Lowe’s peers are as follows:

  • Home Depot (HD) – $148.08 with a potential return of ~6.9%
  • Bed Bath & Beyond (BBBY) – $41.78 with a potential return of ~4.4%
  • Williams-Sonoma (WSM) – $53.63 with a potential return of ~12.8%
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Analysts’ recommendations

Of the 30 analysts that follow Lowe’s (LOW), 60% gave the company a “buy” recommendation, while 40% gave it a “hold” recommendation. No analysts gave a “sell” recommendation. Lowe’s stock price moves in tandem with analysts’ recommendations. As analysts raise their 12-month target prices, Lowe’s stock price should also rise, and vice versa.

Lowe’s (LOW) stock is trading lower than its target price. However, this doesn’t mean that the company is an automatic “buy.” Before investing, you should carefully analyze the various factors that we covered in this series.

In the final part of this series, we’ll look at Lowe’s valuation multiple.


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