Lowe’s Second Quarter Earnings Preview

Lowe’s [[LOW]] is scheduled to report their second quarter results before the market opens on Monday, August 17. Based on our analysis, we at EarningsPreviews.com are expecting LOW to report better than expected results that exceed Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $14.41 billion and EPS of $.55. This would represent a 1% decline in revenues from last year’s $14.51 billion in the same period. The current analyst consensus estimates calls for revenues of $14.33 billion and EPS of $.53.


Over the last few weeks, we have seen increased optimism over improving economic conditions. The housing markets appear to have bottomed, consumer confidence is increasing, and the unemployment rate in July actually improved to 9.4%. These are all positive signs for Lowe’s as consumers begin to invest again in home improvement projects.


Lowe’s has done a good job of managing for the future and has continued to expand its geographic footprint. Last quarter, the home improvement retailer opened 21 new stores and expected to open an additional 18 stores in the second quarter. With home prices stabilizing, we would expect these investments will deliver solid incremental results over the next few quarters.


Stock Performance

Since the beginning of 2009, Lowe’s shares have gained nearly 8% which has slightly outpaced the nearly 7% gain in the Dow Jones industrial average. Last year, Lowe’s stock fell only 5% and easily outperformed the 34% drop in the Dow Jones industrial average.



Shares are now trading at 17x consensus 2010 EPS estimates. This is a premium to the relative valuations of their peer group. We would expect that an improving economic environment will continue to lift Lowe’s shares.


Recommendation: Buy with a $25 price target.


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