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Lowe’s: Analysts Gave Lower Target Prices after Its Q1 Earnings

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May. 28 2019, Published 12:30 p.m. ET

Analysts’ recommendations

After Lowe’s Companies (LOW) reported its first-quarter earnings, several analysts lowered their target prices. The weak first-quarter EPS and lower EPS guidance by the company’s management appear to have prompted analysts to lower their target prices.

  • SunTrust Robinson from $128 to $120
  • UBS from $125 to $115
  • Baird from $133 to $127
  • Wedbush from $110 to $105
  • Citigroup from $127 to $115
  • RBC from $120 to $110
  • Raymond James from $120 to $115
  • Telsey Advisory Group from $126 to $116
  • Jefferies from $126 to $117

Despite the lower-than-expected first-quarter EPS, analysts continue to favor a “buy” rating for Lowe’s. Among the 32 analysts that are covering Lowe’s, 68.8% recommended a “buy,” while 31.2% recommended a “hold.” None of the analysts recommended a “sell.” On average, analysts have given Lowe’s a 12-month target price of $114.21, which represents an upside potential of 19.8% from its stock price of $95.37 on May 24.

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Peer comparisons

Among the 34 analysts that follow Home Depot (HD), 67.6% recommended a “buy,” while 32.4% recommended a “hold.” On average, analysts have given Home Depot a 12-month target price of $206.90, which represents a return potential of 6.9% from its stock price of $193.59.

Valuation multiple

The decline in Lowe’s stock price has also brought its valuation multiple down. As of May 24, the company was trading at a forward PE ratio of 16.0x compared to 17.5x before the announcement of its first-quarter earnings. On the same day, Home Depot was trading at a forward PE ratio of 18.6x.

On May 24, Lowe’s was trading at 17.1x analysts’ 2019 EPS estimate of $5.58 and at 14.3x analysts 2020 EPS estimate of $6.65. The company’s EPS is expected to rise 9.4% in 2019 and 19.2% in 2020.

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