What to Expect from Lowe’s Earnings in the Next 4 Quarters



EPS estimates

For the next four quarters, analysts expect Lowe’s (LOW) to post an EPS (earnings per share) of $4.99, which represents 10.6% growth from $4.51 in the same four quarters of the previous year.

The EPS growth is expected to be driven by revenue growth, expansion in net margins, and share repurchases. For the next four quarters, analysts expect Lowe’s net margins to improve from 5.6% of the total revenue in the same four quarters of the previous year to 5.7%. The expansion is expected to be driven by a lower cost of goods sold and a decline in SG&A (selling, general and administrative) and D&A (depreciation and amortization) expenses. Analysts expect the SG&A expenses to fall from 22.4% to 22.2%, while D&A expenses are expected to fall from 2.2% to 2.1%.

From the beginning of 4Q16 to the end of 3Q17, Lowe’s repurchased 45.3 million shares for $3.55 billion. By the end of 3Q17, the company had the authorization to repurchase ~$2.1 billion worth of shares. Share repurchases boost the company’s earnings by lowering the number of shares outstanding. In the above graph, you can see that Lowe’s has outperformed analysts’ EPS estimates twice in the last five quarters. When this happens, the stock price tends to rise.

Peer comparisons

During the same period, analysts expect Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) to post EPS growth of 11.3%, 2.0%, and -20.8%, respectively.

Next, we’ll discuss analysts’ recommendations and target price.

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