Lowe’s Jumps 6% on Outstanding Q4 Results

American home improvement retailer Lowe’s Companies, Inc. (NYSE: LOW) delivered outstanding fourth-quarter results beating both earnings and revenue estimates, and also increased its full-year fiscal 2022 guidance. The LOW stock jumped 6.1% on the news and ended the day flat at $215.09 on February 23.

The retailer has managed to navigate the pandemic-related supply chain challenges and ended the year with an optimistic outlook. The company’s solid results were aided by increased market share in the DIY and Pro categories through its Total Home Strategy.

However, Lowe’s shares have lost 15.5% year-to-date, vis-à-vis gaining 25.3% over the past year.

Outstanding Results

Lowe’s reported Q4-diluted earnings of $1.78 per share, 8 cents higher than the analyst estimates of $1.70 per share. The number was even better than diluted earnings of $1.32 per share for Q4FY20, and higher than its adjusted earnings of $1.33 per share.

Similarly, quarterly total sales climbed 4.9% to $21.34 billion and also outpaced the analyst estimates of $20.87 billion. Total comparable sales for the quarter leaped 5% and U.S. comparable sales advanced 5.1% compared to the same quarter last year.

For FY21, Lowe’s diluted earnings grew 55.4% to $12.04 per share and net sales increased 7.4% to $96.25 billion.

CEO Comments

Lowe’s Chairman, President, and CEO, Marvin R. Ellison, said, “In 2021, we increased comparable sales by 6.9% while generating over 170 basis points of operating margin improvement, with our relentless focus on productivity and enhanced pricing strategies.  We remain confident in the long-term strength of the home improvement market, and our ability to expand operating margin.”

Increases FY22 Outlook

Based on the current business momentum and economic environment, Lowe’s increased its FY22 outlook.

For FY22, Lowe’s now expects total sales to fall in the range of $97 billion to $99 billion, while the consensus is pegged at the lower end at $97 billion. Moreover, full-year diluted earnings are now projected to be between $13.10 per share and $13.60 per share, much higher compared to the consensus of $12.94 per share.

Notably, Lowe’s expects to repurchase shares of approximately $12 billion and expend about $2 billion in Capex.

Analysts’ View

Responding to Lowe’s beat and raise results, Wells Fargo analyst Zachary Fadem reiterated a Buy rating on the stock with a price target of $295, implying 37.2% upside potential to current levels.

Lowe’s continues to remain Fadem’s top pick for 2022. The analyst’s optimistic view on the stock is based on several factors including, “narrowing top-line trends versus peer Home Depot (HD), structural margin improvement, and valuation expansion as self-help initiatives drive market share gains and outsized shareholder returns.”

Despite the macroeconomic uncertainties, Fadem believes that the LOW stock trades at an attractive entry point at nearly 16.5x his FY22 outlook.

Overall, the stock commands a Strong Buy consensus rating with 13 Buys and 1 Hold. The average Lowe’s price target of $288.23 implies 34% upside potential to current levels.

Stock Analysis

According to TipRanks’ Smart Score, Lowe’s scores a “Perfect 10”, indicating that the stock is very likely to outperform the market. Bloggers and news articles are bullish on the stock, and hedge funds have increased their holdings of LOW stock by 1.9 million shares in the last quarter.

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