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Lowe’s Tops Earnings Estimates, Misses on Sales

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Today, Lowe’s Companies (NYSE:LOW) reported its fourth-quarter earnings, which ended on January 31. For the quarter, the company reported an adjusted EPS of $0.94, which beat analysts’ estimates of $0.91. However, the company’s revenue came in at $16.03 billion, which fell short of analysts’ estimate of $16.15 billion. The company’s same-store sales only rose 2.5%, while analysts expected the same-store sales to rise by 3.6%. The weaker-than-expected sales didn’t impress investors. Lowe’s was trading in the red in today’s pre-market hours of trading.

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Lowe’s YoY revenue growth

Although Lowe’s missed analysts’ sales estimates, its revenue increased by 2.4% from $15.65 billion in the fourth quarter of 2018. The SSSG of 2.5% drove the company’s revenue during the quarter. However, Lowe’s decision to exit its Mexico retail operations and close 20 under-performing stores in the US and 31 stores in Canada offset some of the revenue gains. By the end of the fourth quarter, the company operated 1,977 home improvement and hardware stores compared to 2,015 at the end of the fourth quarter of 2018. 

Higher EPS in Q4

For the quarter, Lowe’s reported net profits of $509 million, which translated to an EPS of $0.66. However, removing one-time expenses of $185 million, the company’s adjusted EPS was $0.94. The EPS increased by 17.5% from $0.80 in the fourth quarter of 2018. During the quarter, the company repurchased shares worth approximately $670 million and paid dividends of $423 million. Higher revenue growth, increased net margins, and share repurchases drove the company’s EPS during the quarter. 

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Management’s outlook in 2020

For 2020, Lowe’s management expects its revenue to rise by 2.5%–3.0% driven by an SSSG of 3.0%–3.5%. They expect the company’s adjusted operating income to rise by 8%–12%. Lowe’s adjusted operating margin could improve by 0.50%–0.70%. For 2020, management expects the company’s effective tax rate to be approximately 24.5%. Lowe’s management plans to repurchase shares worth approximately $5 billion in 2020. The company’s management expects it to report an adjusted EPS of $6.45–$6.65 this year.

Lowe’s stock performance

After delivering impressive returns of 29.7% last year, Lowe’s stock has fallen by 1.0% as of Tuesday. Today, the stock could fall after the company missed its fourth-quarter revenue and SSSG estimates. Meanwhile, Home Depot (NYSE:HD), which reported impressive fourth-quarter earnings yesterday, has returned 8.7% YTD. During the same period, Williams-Sonoma (NYSE:WSM) and RH (NYSE:RH) have fallen by 9.4% and 0.8%, respectively.

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