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Has Lowe’s Stock Price Bottomed Out?

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Stock performance

On March 23, 2018, Lowe’s Companies (LOW) was trading at $83.77, which represents a fall of 12.5% since the announcement of its 4Q17 earnings on February 28, 2018.

In 4Q17, Lowe’s posted adjusted EPS (earnings per share) of $0.74 on revenues of $15.5 billion. Analysts were expecting the company to post EPS of $0.87 on revenues of $15.3 billion. 

The company outperformed analysts’ SSSG (same-store sales growth) estimate of 3.1% by posting SSSG of 4.1%. Although Lowe’s SSSG and revenues were greater than analysts’ expectations, its stock price declined due to fall in Lowe’s net margins, as well as the weakness in the broader equity market due to the rumblings of a trade war between the US and China. 

In 4Q17, Home Depot (HD) had posted a strong 4Q17 earnings with SSSG of 7.5%, which appears to have made investors wary of Lowe’s future sales.

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Year-to-date performance

In 2017, Lowe’s stock price returning 30.7%. However, since the beginning of 2018, its stock price has declined 9.9%. 

Comparatively, the stock prices of Home Depot, Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) fell 9.4%, 3.1%, and 3.1%, year-to-date, respectively. The S&P 500 Index (SPX) and the SPDR S&P Homebuilders ETF (XHB) have returned -3.2%, and -9.9%, respectively, year-to-date.

Series overview

In this series, we’ll look at analysts’ revenue and EPS estimates for the next four quarters. We’ll also cover management’s guidance for 2018. Finally, we’ll look at the company’s valuation multiple and analysts’ recommendations.

Let’s start by looking at analysts’ revenue expectations for the next four quarters.

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