EPS expectations for 2018
For the first three quarters of 2018, Lowe’s (LOW) posted an adjusted EPS of $4.21—15.3% growth from $3.65 in the first three quarters of 2017. The EPS growth was driven by the company’s revenue growth, lower effective tax rate, and share repurchases. Lowe’s has repurchased shares worth ~2.5 billion in the first three quarter of 2018.
However, some of the EPS growth was offset by the decline in the EBIT (earnings before interest and tax) margins. Lower gross margins due to inventory rationalization initiatives and higher SG&A (selling, general, and administrative) expenses due to the adoption of the new revenue recognition standard led to a decline in the company’s EBIT margins.
For 2018, Lowe’s management expects its adjusted EPS to be $5.08–$5.13. During the same period, analysts expect the company’s EPS to rise 16.5% to $5.11. In comparison, Home Depot (HD) and Williams-Sonoma (WSM) are expected to post EPS growth of 31.4% and 20.0% in 2018, respectively.
EPS expectations for 2019
For 2019, analysts expect Lowe’s to post an adjusted EPS of $5.90—15.5% growth from $5.11 in 2017. The EPS growth will likely be driven by revenue growth, expanded net margins, and share repurchases. During the same period, analysts expect Lowe’s net margin to improve from 5.8% to 6.3% due to the higher gross margin and lower SG&A expenses. By the end of the third quarter, the company had ~$4.5 billion under its share repurchase program.
In comparison, analysts expect Home Depot and Williams-Sonoma to post EPS growth of 5.0% and 2.9% in 2019, respectively.
Next, we’ll discuss analysts’ recommendations.