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Lowe's stock maintains price target, Overweight rating by JPMorgan

EditorAhmed Abdulazez Abdulkadir
Published 2024-05-22, 12:22 p/m
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On Wednesday, JPMorgan (NYSE:JPM) maintained its Overweight rating and $268.00 price target on Lowe's Companies, Inc. (NYSE:LOW). The home improvement retailer reported a 4% earnings per share (EPS) beat, attributed to a smaller-than-expected decline in comparable store sales.

Lowe's comparable sales decreased by 4.1%, which was more favorable than JPMorgan's projection of -5.5% and the -5.6% consensus estimate. This performance also compared positively to the 5.5-6.0% decline experienced by Home Depot (NYSE:HD).

The company saw a mix of results across different departments, with declines in big-ticket discretionary items being counterbalanced by positive results in lawn and garden, professional customer sales, and online, which saw a 1% increase.

Despite a gross margin of 33.2% that did not meet JPMorgan's expectation of 32.6% and the broader market's anticipation of 33.5%, Lowe's was impacted by promotions, price cost timing, net supply chain costs, and a modest credit card headwind.

Operating margin, however, came in at 12.4%, slightly above both JPMorgan's and the market's estimate of 12.3%. This was largely due to the company's effective expense control driven by productivity efforts. Even with these results, Lowe's EPS saw a year-over-year decline of 17%, which the company attributes to lapping an estimated 80 basis points one-time legal benefit from the previous year.

The assessment by JPMorgan reflects the company's resilience in a challenging retail environment, marked by selective consumer spending and pressure on discretionary categories.

Lowe's performance in key segments like professional services and online sales demonstrates its ability to adapt and maintain operational efficiency amid market headwinds.

InvestingPro Insights

With Lowe's Companies, Inc. (NYSE:LOW) demonstrating resilience in its latest earnings report, insights from InvestingPro offer additional context on the company's financial health and market position. Lowe's has a notable track record of raising its dividend, having done so for 40 consecutive years, and maintaining payments for 54 years, which underscores its commitment to shareholder returns. This is particularly relevant as the company navigates through a challenging retail environment.

InvestingPro data shows that Lowe's market capitalization stands at a robust $128.66 billion, with a P/E ratio of 18.37, slightly below the adjusted P/E ratio from the last twelve months as of Q1 2025, which is at 17.87. This could indicate that the stock is trading at a reasonable valuation relative to its near-term earnings growth, a factor that might be attractive to value investors. Moreover, the PEG ratio for the same period is 0.56, suggesting potential for growth when compared to the P/E ratio.

Despite a revenue decline of 10.81% over the last twelve months as of Q1 2025, the company remains profitable with an operating income of $10.92 billion, and a solid operating income margin of 13.38%. Lowe's also boasts a return on assets of 15.82%, highlighting its efficiency in utilizing its asset base to generate profits.

For investors considering Lowe's as part of their portfolio, there are 9 additional InvestingPro Tips available, which can offer deeper insights into the company's performance and outlook. To explore these tips and make more informed investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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