uploads/2019/06/LOW_3.jpg

Lowe’s: What to Expect in 2019

By

Updated

Management’s guidance

For 2019, Lowe’s (LOW) management expects its revenues to rise 2.0% with an SSSG (same-store sales growth) of 3.0%. The company expects its adjusted operating margin to expand 0.2%–0.5%. Lowe’s adjusted EPS is projected to be $5.45–$5.65

Analysts’ estimates

Analysts expect Lowe’s to report an adjusted EPS of $5.57 in 2019, which implies a rise of 9.2% from $5.10 in 2018. The revenue growth, expanded EBIT margin, lower effective tax rate, and lower shares outstanding due to share repurchases will likely drive the company’s EPS in 2019.

Analysts expect Lowe’s to post revenues of $72.56 billion in 2019—a rise of 1.8% from $71.31 billion in 2018. The increased same-store sales will likely drive Lowe’s revenues, while the company’s decision to exit some of its non-core businesses and the lower store count will likely offset some of the increased revenues. Lowe’s management is focusing on increasing customer engagement, implementing digital advancements, improving pricing analytics, and expanding its offerings to drive its SSSG.

The decline in Lowe’s SG&A (selling, general, and administrative) expenses will likely improve its EBIT margin from 8.1% in 2018 to 8.8%. Analysts expect Lowe’s effective tax rate to be 23.5% for 2019 compared to 24.2% in 2018.

Moving to share repurchases, Lowe’s repurchased shares worth $818 million during the first quarter. The company’s management plans to repurchases shares worth $4.0 billion in 2019.

Peer comparisons

For 2019, analysts expect Home Depot (HD) to report revenues of $111.38 billion, which implies a rise of 2.9% from $108.2 billion in 2018. During the same period, Home Depot’s EPS is expected to rise 2.3% to $10.12.

Dividends

On May 31, Lowe’s board announced an increase in its quarterly dividends by 14.6% to $0.55 per share. The dividends will be paid on August 7 to shareholders on record as of July 24. As of June 27, the company’s dividend yield was 2.21%. Lowe’s stock price was trading at $99.36. In comparison, Home Depot’s dividend yield was 2.63% on the same day.

More From Market Realist