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Why Lowe’s 3Q17 Earnings Failed to Impress

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3Q17 performance

Lowe’s Companies (LOW) posted its 3Q17 earnings on November 21. The company posted adjusted EPS (earnings per share) of $1.05 on revenues of $16.77 billion. Compared to 3Q16, the company’s EPS rose 19.3% while revenues rose 6.6%.

Stock performance

Analysts were expecting Lowe’s to post EPS of $1.02 on revenues of $16.59 billion. Also, the company outperformed analysts’ SSSG (same-store sales growth) estimate of 4.6% by posting SSSG of 5.7%. Despite posting strong 3Q17 earnings, Lowe’s didn’t raise its 2017 guidance, which appears to have made investors skeptical about the company’s future earnings, leading to a fall in the company’s stock price. By the end of November 21, Lowe’s was trading at $80.59, which represents a fall of 1.1% from its previous day’s closing price.

Year-to-date performance

Despite the fall in its stock price, 2017 has been a good year for Lowe’s. The company has returned 13.3% since the beginning of 2017. Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 28.9%, -5.8%, and -50.1%, respectively.

The S&P 500 Index (SPX) and the SPDR S&P Homebuilders ETF (XHB) have returned 16.1%, and 24.6%, year-to-date, respectively. XHB has invested more than 24.0% of its holding in home improvement and home furnishing companies.

Series overview

In this series, we’ll look at Lowe’s 3Q17 earnings call and also compare its performance with analysts’ estimates. We’ll also cover management’s 2017 guidance and analysts’ estimates for the next four quarters. We’ll wrap up this series by looking at Lowe’s valuation multiple and analysts’ recommendations.

First, let’s start our analysis by looking at Lowe’s 3Q17 revenue.

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