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Why Lowe’s Stock Price Rose on March 26

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Mar. 27 2018, Updated 8:08 a.m. ET

Stock performance

On March 26, 2018, Lowe’s Companies (LOW) announced that its CEO, Robert Niblock, would step down once the company finds a suitable successor. The announcement appears to have pleased investors, as the stock price of the company rose as high as $90.33 and closed the day at $89.30. The stock posted a rise of 6.6% from its previous day’s closing price.

Lowe’s has been trailing Home Depot (HD) in both SSSG (same-store sales growth) and margins, which had prompted D.E. Shaw Group, a hedge fund that had bought nearly a $1 billion stake in the company, to push for changes. The departure of Niblock has been the third major departure at Lowe’s in the last year with the retirements of CFO Robert Hull and COO Rick Damron. Lowe’s board has announced that a six-member committee has been formed under the leadership of D.E. Shaw-backed director David Batchelder to identify the successor.

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Year-to-date performance

2017 was a good year for Lowe’s with stock price returns of 30.7%. However, since the beginning of 2018, the stock price of the company has declined by 3.9%. The stock price of Lowe’s peers, Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have declined by 6.9%, 0.2%, and 4.2%, year-to-date, respectively. The S&P 500 Index (SPX) and the SPDR S&P Homebuilders ETF (XHB) have fallen 0.6% and 7.5%, respectively.

Valuation multiple

The rise in stock price has increased the forward PE (price-to-earnings) multiple of Lowe’s from 15.0x to 16.0x. On the same day, peers Home Depot, Williams-Sonoma, and Bed Bath & Beyond were trading at a forward PE multiple of 18.5x, 12.3x, and 7.6x, respectively.

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