Lowe's (LOW) stock is struggling for direction Tuesday after the home improvement retailer reported second-quarter results that were mixed compared with analysts' expectations and slashed its full-year outlook.
In the three months ended August 2, Lowe's said its revenue decreased 5.6% year-over-year to $23.6 billion, pressured by a 5.1% decline in comparable-store sales, also known as same-store sales. Its earnings per share (EPS) were down 10.1% from the year-ago period to $4.10.
"The company delivered strong operating performance and improved customer service despite a challenging macroeconomic backdrop, especially for the homeowner," said Lowe's CEO Marvin Ellison in a statement. "At the same time, we continue to build momentum with our Total Home strategy reflected by our mid-single-digit positive comparisons with the Pro customer this quarter."
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The results were mixed compared with what analysts were anticipating. Specifically, Wall Street targeted revenue of $23.9 billion and earnings of $3.97 per share for Lowe's Q2, according to Yahoo Finance.
Lowe's also updated its full-year outlook "based on lower-than-expected DIY sales and a pressured macroeconomic environment." Here's what it now expects for its fiscal year:
| Metric | New outlook | Previous outlook |
|---|---|---|
| Revenue | $82.7 billion to $83.2 billion | $84 billion to $85 billion |
| Comparable-store sales | (3.5%) to (4%) | (2%) to (3%) |
| EPS | $11.70 to $11.90 | $12 to $12.30 |
"As we look ahead, we are confident that we are making the right long-term investments to take share when the market recovers," Ellison said.
Is Lowe's stock a buy, sell or hold?
Lowe's has lagged the broader market so far this year, up 11% on a total return basis (price change plus dividends) vs the S&P 500's nearly 19% gain. Yet Wall Street remains bullish on the consumer discretionary stock.
Indeed, of the 35 analysts covering LOW tracked by S&P Global Market Intelligence, 12 say it's a Strong Buy, four have it at Buy, 17 say it's a Hold and two call it a Sell or Strong Sell. This works out to a consensus recommendation of Buy.
Speaking for the bulls is financial services firm BofA Securities, which has a Buy rating and $280 price target on Lowe's stock.
"LOW is capitalizing on investments it has made to better service the small and medium-sized pro and gain share, including its pro rewards program, pro inventory (bringing back brands it had lost), and piloting some solutions for larger order job site delivery," wrote BofA Securities analyst Robert Ohmes in a June 4 note. "While share gains should support this segment, LOW's pro growth vs the industry is also supported by the relative resilience of the small to medium-sized pro, which can more easily shift from a remodel occasion to a repair occasion."
What's more, Lowe's is one of the top dividend growth stocks, having raised its payout for 50 straight years. Why does dividend growth matter?
"Shares in companies that raise their payouts like clockwork decade after decade can produce superior total returns (price change plus dividends) over the long run, even if they sport apparently ho-hum yields to begin with," writes Dan Burrows, senior investing editor at Kiplinger.com, in his feature "Best Dividend Stocks to Buy for Dependable Dividend Growth." To be sure, without calculating in Lowe's 1.9% dividend yield, the stock's year-to-date return would be closer to 8%.
Burrows adds that increases in shareholder-friendly initiatives such as dividends also offer peace of mind. "After all, any company that manages to raise its dividend year after year – through recession, war, market crashes and more – is demonstrating both its financial resilience and its commitment to returning cash to shareholders," he writes.
Related Content
-
Three Ways President Trump Could Impact the EconomyThe Letter Some of Trump's top priorities could boost economic growth, but others risk fueling inflation.
-
Average Health Care Costs by Age: Can You Afford It?Expect to pay more as you age. We've got solutions for how to cover these costs, which can exceed $1,000 per month in your 60s.
-
Will You Be Able to Afford Your Dream Retirement?You might need to save more than you think you do. Here are some expenses that might be larger than you expect, along with ways to ensure you save enough.
-
More SECURE 2.0 Retirement Enhancements Kick in This YearSaving for retirement gets a boost with these SECURE 2.0 Act provisions that are starting in 2025.
-
Saving for Your Emergency Fund: As Easy as 1-3-6An emergency fund that can cover six months' worth of expenses is far easier to build if you focus on smaller goals at first.
-
Stock Market Today: Dow Slides 697 Points on Super-Hot Jobs DataWhen the December nonfarm payrolls report hit the tape, there was no question which way stocks would go at Friday's opening bell.
-
Blowout December Jobs Report Puts Rate Cuts on Ice: What the Experts Are SayingJobs Report The strongest surge in hiring since March keeps the Fed on hold for now.
-
Constellation Energy Stock Soars on Its $26 Billion Buy. Here's Why Wall Street Likes the DealConstellation Energy is one of the best S&P 500 stocks Friday after the utility said it will buy Calpine in a cash-and-stock deal valued at $26 billion.
-
Why Walgreens Is the Best S&P 500 Stock After EarningsWalgreens stock is soaring Friday after the embattled pharmacy chain reported strong earnings and gave an upbeat outlook.
-
Delta Stock Remains a Strong Buy After EarningsDelta stock is soaring Friday after the air carrier beat earnings expectations and issued a strong outlook. Here's what investors need to know.
