As of May 24, Lowe’s Companies (LOW) was trading at $95.37—a fall of 14.2% since the announcement of its first-quarter earnings on May 22. The company is trading at a discount of 19.3% from its 52-week high of $118.23 and at a premium of 12.5% from its 52-week low of $84.75.
For the first quarter, Lowe’s reported revenues of $17.74 billion, which beat analysts’ expectation of $17.66 billion. The company’s SSSG was 3.5% and outperformed analysts’ expectation of 3.2%. However, Lowe’s adjusted EPS fell short of analysts’ estimate of $1.33 at $1.22. The company’s management has blamed the convergence of cost pressure, significant changes to its merchandising organization, and its ineffective pricing tools and processes for its lower-than-expected EPS. After Lowe’s first-quarter results, the company’s management also lowered its diluted EPS guidance to $5.54–$5.74 compared to its earlier guidance of $6.00–$6.10. The lower-than-expected first-quarter earnings and lower EPS guidance might have led to a fall in the company’s stock price.
Despite the recent fall in Lowe’s stock price, it has returned 3.3% since the beginning of this year. In 2019, the company has been lagging the broader equity market and its peers. YTD (year-to-date), the S&P 500 Index has returned 12.7%, while the SPDR S&P Homebuilders ETF (XHB), which invests ~21% of its holdings in home improvement and furnishing companies, has returned 22.3%. Home Depot (HD) has returned 12.7% YTD. Home Depot posted its first-quarter earnings on May 21. Read Key Takeaways from Home Depot’s Q1 Earnings to learn more.
In this series, we’ll discuss analysts’ recommendations and target prices after Lowe’s reported its first-quarter earnings. We’ll also discuss Lowe’s valuation multiple compared to its peers. We’ll discuss analysts’ expectations and management’s guidance for 2019.