September 26, 2022

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Lowe’s (LOW) Q1 Earnings Beat Estimates, Sales Decline Y/Y

Lowe’s Companies, Inc. LOW delivered mixed first-quarter fiscal 2022 results, with the top line lagging the Zacks Consensus Estimate and the bottom line beating the same. Also, earnings improved on a year-over-year basis on strong margins. LOW delivered its 12th straight earnings beat in the quarter while broke its eighth consecutive sales surprise. LOW has been witnessing improving sales trends in May so far.  

Shares of the home-improvement retailer gained 1.2% in the pre-market trading session on May 18. This presently Zacks Rank #3 (Hold) player’s shares have gained 6.5% in the past six months compared with the industry’s growth of 2.9%.

Quarter in Detail

Earnings per share (EPS) of $3.51 surpassed the Zacks Consensus Estimate of $3.24 and rose 9.3% from the adjusted EPS of $3.21 recorded in the first quarter of fiscal 2021.

Lowe’s Companies, Inc. Price and EPS Surprise

Lowe’s Companies, Inc. Price and EPS Surprise

Lowe’s Companies, Inc. price-eps-surprise | Lowe’s Companies, Inc. Quote

Net sales of $23,659 million were down 3.1% year over year and came below the Zacks Consensus Estimate of $23,731 million. Comparable sales dipped 4% in the quarter under review. Comparable sales for the U.S. home-improvement business decreased 3.8% in the reported quarter. Pro customer sales jumped 20%.

LOW’s outdoor seasonal categories were hurt by unseasonably cold temperatures in April.  Quarterly sales were disproportionately affected by the cooler spring temperatures as 75% of its customer base is DIY.

Gross profit dipped 0.9% year over year to $8,050 million, while gross margin expanded 74 basis points (bps) to 34.03%. Operating income amounted to $3,302 million, up 1.8% year over year. Operating margin expanded 67 bps to 13.96%, on gains from the Total Home strategy and the execution of the Perpetual Productivity Improvement initiative.

Other Financial Aspects & Developments

LOW ended the quarter with cash and cash equivalents of $3,414 million, long-term debt (excluding current maturities) of $28,776 million and a shareholders’ deficit of $6,877 million.

Lowe’s generated cash flow from operations of $2,977 million for the three months ended Apr 29, 2022. Capital expenditures amounted to $343 million. For fiscal 2022, LOW expects capital expenditures of nearly $2 billion.

In the reported quarter, Lowe’s bought back around 19 million shares for $4.1 billion and paid out dividends of $537 million. LOW expects to repurchase nearly $12 billion shares in fiscal 2022.

As of Apr 29, 2022, Lowe’s operated 1,971 home-improvement and hardware stores across the United States and Canada. LOW serviced nearly 230 dealer-owned stores.

Outlook

Management reiterated guidance for fiscal 2022. LOW expects revenues of $97-99 billion (including the 53rd week). The 53rd week is likely to increase sales by $1-$1.5 billion. In fiscal 2021, Lowe’s revenues amounted to $96.3 billion.

Comparable sales in fiscal 2022 are envisioned in the range of a decline of 1% to a rise of 1%. Lowe’s continues to expect the gross margin rate to improve slightly year over year. The operating margin is expected to be 12.8-13%.

3 Top Retail Stocks for You

We highlighted three better-ranked stocks in the Retail – Wholesale sector, namely Tecnoglass TGLS, Boot Barn Holdings BOOT and Fastenal FAST.

Tecnoglass engages in manufacturing and selling architectural glass and windows, and aluminum products for the residential and commercial construction industries. It currently sports a Zacks Rank #1 (Strong Buy). Shares of TGLS have jumped 12.9% in the past year.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 21.3% and 28.7%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 28.3%, on average.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently flaunts a Zacks Rank of 1. BOOT has a trailing four-quarter earnings surprise of 25.2%, on average. Shares of BOOT have rallied 19.8% in the past year.
 
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and earnings per share suggests growth of 17% and 4.4%, respectively, from the corresponding year-ago  reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Fastenal, a national wholesale distributor of industrial and construction supplies, currently has a Zacks Rank #2 (Buy). FAST has a trailing four-quarter earnings surprise of 5%, on average. Shares of FAST have inched up 0.6% in the past year.

The Zacks Consensus Estimate for Fastenal’s current financial-year sales and earnings per share suggests growth of 15.4% and 16.3%, respectively, from the corresponding year-ago reported numbers. FAST has an expected EPS growth rate of 9% for three-five years.

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Lowe’s Companies, Inc. (LOW) : Free Stock Analysis Report
 
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