Lowe’s: Will Its Upward Momentum Continue?



Stock performance

Lowe’s (LOW) reported its first-quarter results on May 22. The company posted an adjusted EPS of $1.22 for the first quarter, which fell short of analysts’ EPS expectation of $1.33. The convergence of cost pressure, Lowe’s ineffective pricing tools and processes, and significant changes to its merchandising organization were blamed for its lower-than-expected first-quarter EPS. To learn more, read Lowe’s Stock Fell after Weak Q1 Earnings.

After Lowe’s reported its first-quarter results, management lowered the diluted EPS guidance. The lower-than-expected first-quarter EPS and lower EPS guidance caused the stock price to fall to a low of $91.60 as of May 29. Since then, the stock has gained upward momentum. As of June 27, the company was trading at $99.36, which implies a rise of 8.5% from its lows on May 29.

Wage inflation, the lower unemployment rate, lower mortgage rates, and the announcement by Fed Chair Jerome Powell on June 4 led to a rise in Lowe’s stock price. On June 4, Powell announced that the Fed is monitoring the impact of trade disputes on the US economy. He said that the Fed is willing to act appropriately to support economic growth. Investors are optimistic about Marvin Ellison’s turnaround initiatives. Lowe’s reported an SSSG (same-store sales growth) of 4.2% in the US. Lowe’s outperformed Home Depot’s (HD) SSSG of 3.0% during the first quarter.

YTD performance

Lowe’s has returned 7.6% YTD (year-to-date) as of July 27. The company has underperformed the broader equity market and its peers. The S&P 500 Index has returned 16.7% YTD, while the SPDR S&P Homebuilders ETF (XHB), which invests ~25% of its holdings in home improvement and furnishing companies, has returned 26.7% YTD.

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