Why Lowe’s 4Q17 Earnings Failed to Impress Investors



4Q17 performance

Lowe’s Companies (LOW) announced its 4Q17 earnings before the market opened on February 28, 2018. It reported adjusted EPS (earnings per share) of $0.74 on revenues of $15.5 billion. Compared to 4Q16, revenue fell 1.8%, while EPS fell 14%.

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Stock performance

In 4Q17, analysts were expecting Lowe’s 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%. Despite better-than-expected 4Q17 sales, LOW stock fell due to lower margins and lower-than-expected earnings. The strong performance of Home Depot (HD) during the same period appears to have made investors skeptical of Lowe’s future earnings, leading to a fall in the stock. As of March 2, 2018, Lowe’s was trading at $85.34, which represents a fall of 10.9% since the announcement of its 4Q17 earnings.

Year-to-date performance

Last year was good for Lowe’s with its stock rising 30.7%. However, since the beginning of 2018, the stock has fallen 8.2%. Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned -5.8%, 2.3%, and -0.7%, respectively, year-to-date. The broader comparative indexes, the S&P 500 Index (SPX-INDEX) and the SPDR S&P Homebuilders ETF (XHB), have returned 0.7%, and -9.0%, respectively.

Series overview

In this series, we’ll look at Lowe’s 4Q17 performance and compare it to analysts’ estimates. We’ll also look at management’s guidance and analysts’ estimates for 2018. Finally, we’ll look at its valuation multiple and analysts’ recommendations for the stock.

Let’s start by looking at Lowe’s 4Q17 revenue.


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