Second-quarter performance

Lowe’s Companies (LOW) posted its second-quarter earnings before the market opened on August 22. The company posted adjusted EPS of $2.07 on revenue of $20.89 billion in the quarter. Year-over-year, the company’s EPS rose 31.8%, while its revenue rose 7.1%.

Did Lowe’s Meet Analysts’ Expectations in Q2 2018?

Stock performance

Lowe’s outperformed analysts’ EPS expectation of $2.02 and their revenue estimate of $20.78 billion. However, the company’s SSSG (same-store sales growth) fell short of analysts’ expectation of 5.3%, coming in at 5.2%.

Lowe’s management also announced that it would be closing all 99 Orchard Supply Hardware stores and its distribution facility by the end of 2018 to focus on its core home improvement business. Accounting for Orchard’s closure and inventory cuts, Lowe’s management lowered its revenue, SSSG, and EPS guidance, which led the company’s stock price to fall in premarket hours on August 22.

However, the stock reversed the trend in regular trading hours on optimism surrounding Marvin Ellison’s turnaround initiatives. Ellison, who joined Lowe’s as its CEO in July, has simplified the company’s organizational structure and made some important leadership appointments. He’s focusing on rationalizing the company’s store inventory, eliminating projects that aren’t adding value to its core business, and diverting $500 million worth of capital to a share repurchase program.

The announcement of these initiatives led the company’s stock price to rise to a high of $109.80 before closing at $105.52 on August 22, a rise of a 5.8% from its previous day’s close.

Year-to-date performance

Since the beginning of 2018, Lowe’s stock price has risen 13.5%. Comparatively, its peers Home Depot (HD), Williams-Sonoma (WSM), and Bed Bath & Beyond (BBBY) have returned 5.0%, 21.1%, and -15.4%, respectively, year-to-date. Meanwhile, the price of the broader comparative index, the SPDR S&P Homebuilders ETF (XHB), which invests 23.0% of its holdings in home improvement and furnishing companies, has fallen 8.5%.

Series overview

In this series, we’ll look at Lowe’s performance in the second-quarter and compare it with analysts’ expectations. We’ll also cover management’s guidance and analysts’ expectations for it over the next four quarters. We’ll end the series by looking at the company’s valuation multiple and analysts’ recommendations.

Let’s start our analysis by looking at Lowe’s second-quarter revenue.

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