What’s Driving Lowe’s Stock Price?



Stock performance

Although Lowe’s (LOW) outperformed analysts’ revenue and EPS (earnings per share) estimates in 3Q17, the company’s management didn’t raise its guidance for 2017, which caused the company’s stock price to fall to $79.11 on November 24, 2017.

However, the Senate passed the Republican tax bill on December 2, 2017. The bill proposed lowering the maximum corporate tax from 35% to 20%. It appears to have made investors optimistic about Lowe’s future earnings, which led to a rise in its stock price. As of December 14, 2017, Lowe’s was trading at $85.58, which represents a rise of 5.1% since the announcement of its 3Q17 earnings on November 21, 2017. The company’s current stock price is 3.5% lower than its 52-week high of $88.55. In 3Q17, Lowe’s effective tax rate stood at 37.1%.

Year-to-date performance

In 2017, Lowe’s was able to withstand an assault by Amazon (AMZN), which has been aggressively expanding its retail presence. Since the beginning of 2017, the company’s stock price has risen 20.3%. During the same period, its peers Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 35.8%, 4.1%, and -44.7%, respectively.

Notably, the broader comparative indices, the SPDR S&P Homebuilders ETF (XHB) and the S&P 500 Index (SPX) have returned 27.1% and 18.5%, year-to-date, respectively. XHB has invested more than 23% of its holdings in home improvement and home furnishing companies.

Series overview

In this series, we’ll look at analysts’ revenue and EPS expectations for the next four quarters. We’ll also discuss management’s guidance for 2017. In the last part, we’ll look at Lowe’s valuation multiple and analysts’ recommendations.

Next, we’ll discuss analysts’ revenue estimates for Lowe’s.

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