Earnings in Focus: How Lowe’s, Target, and Nvidia Navigated Q3 Challenges

Lowe’s contended with cautious consumer spending and macroeconomic headwinds, Target capitalised on select discretionary spending categories while grappling with profitability pressures, and Nvidia thrived amid an AI-driven boom despite supply chain and margin constraints.

As we approach their Q3 releases, let’s take a closer look at what analysts are saying and what traders and investors should be aware of.

Lowe’s Q2 Gains Tempered by Slowing Consumer Demand

Lowe’s delivered mixed Q2 2024 results, surpassing earnings expectations but missing sales targets, which led to a downward revision of its full-year outlook. Adjusted earnings per share (EPS) came in at $4.10, exceeding the $3.97 consensus. However, revenue totaled $23.59 billion, slightly below the $23.91 billion estimate, and net income dropped to $2.38 billion, or $4.17 per share, compared to $2.67 billion, or $4.56 per share, a year earlier.

This sales shortfall stemmed largely from high inflation and cautious consumer behaviour. Homeowners—accounting for 90% of Lowe’s customer base—are deferring significant home improvement projects. With most holding fixed 30-year mortgages at rates below 4%, rising interest rates further deter new borrowing and spending.

Macroeconomic Challenges

At the time of Q2 reporting, the Federal Reserve had not implemented substantial interest rate cuts. While a September reduction brought rates to a 4.75%-5% range, inflation remains above the Fed’s 2% target. Analysts expect further cuts to be gradual, with limited immediate relief for homeowners.

Adding to Lowe’s challenges are potential inflationary pressures from the new U.S. administration’s policies, including tariffs of 60% on Chinese imports and 10% on goods from other countries. These measures could drive up costs for consumers, affecting spending on discretionary items like home improvement supplies, toys, and appliances.

Q3 2024 Expectations

Lowe’s will report its Q3 2024 earnings on November 19 (pre-market). Analysts project a continued decline, with EPS expected to fall to $2.81 and revenue to $19.90 billion.

Technical Snapshot of Lowe’s’ Share

Target Delivers Q2 Growth, But Clouds Loom Over Q3

Target delivered a solid performance in Q2 2024, exceeding Wall Street expectations. The retailer reported EPS of $2.57, beating the forecasted $2.18, and achieved revenue of $25.45 billion, surpassing the anticipated $25.21 billion. This 3% year-over-year revenue growth marked a rebound after a challenging period of flat sales and margin pressures.

The improvement was fueled by discretionary spending on categories such as apparel, which saw a 3% sales increase compared to the same quarter last year. Target’s ability to capitalise on trends and offer affordable, stylish merchandise has resonated with consumers, driving growth even amid economic uncertainties.

Challenges in the Near Term

Despite these positive results, Target remains cautious about its future performance. Persistent inflation and high interest rates continue to weigh on consumer spending, particularly on discretionary items like home decor and apparel, as households prioritise essentials such as food and housing. Additionally, Target’s profit margins have been pressured by a shift in consumer spending toward lower-margin categories like groceries.

The retailer also faces external challenges, including inventory shrinkage due to theft and organised retail crime, which has further impacted profitability. Target has reported ongoing efforts to address these issues, but the financial impact remains a concern.

Q3 2024 Expectations

Target is scheduled to release its Q3 2024 earnings on November 20 (pre-market). Analysts expect EPS to dip slightly to $2.40, reflecting tighter margins, while revenue is projected to rise modestly to $25.91 billion.

Technical Snapshot of Target’s Share

Nvidia: Riding the AI Boom with Challenges Ahead

Nvidia continued its dominance in the tech sector, delivering exceptional Q2 2024 results. Surpassing Wall Street expectations, the company highlighted its leadership in AI hardware and solutions while offering robust guidance for Q3.

Q2 2024 Highlights: Stellar Growth Amid AI Momentum

Nvidia delivered an impressive performance, with revenue surging 122% year-over-year for the fourth consecutive quarter and net income surging to $16.6 billion, a significant increase from $6.18 billion a year ago.

The data centre division was a standout performer, achieving $26.3 billion in revenue due to unprecedented demand for AI-driven hardware. CEO Jensen Huang emphasised the transformative potential of accelerated computing and generative AI, projecting data centres as Nvidia’s primary growth driver. Q3 revenue from this segment is expected to reach $29.53 billion.

In addition, Nvidia’s networking division contributed $3.7 billion in Q2 revenue, serving major clients such as Microsoft, Alphabet, Meta, and Tesla.

Key Challenges: Supply Constraints and Margin Pressures

Despite its strong trajectory, Nvidia faces significant hurdles. Supply chain constraints could limit the availability of its next-generation AI chip, Blackwell, described by Huang as a “complete game changer.” While samples were shipped during Q2, manufacturing efficiencies are still being refined, potentially dampening near-term gains.

Gross margins declined to 75.1% in Q2, down from 78.4% in the previous quarter but above the 70.1% reported a year ago. Although manageable, this reflects profitability pressures as Nvidia scales to meet demand.

Q3 2024 Expectations

Nvidia will report its Q3 2024 earnings on November 20 (post-market). Analysts anticipate continued growth, with EPS projected at $0.75 and revenue expected to climb to $33.07 billion. Updates on Blackwell chip shipments and the resolution of supply constraints will be critical for Nvidia’s outlook.

Technical Snapshot of Nvidia’s Share

Bottom Line

The Q3 2024 earnings season is poised to shed light on how Lowe’s, Target, and Nvidia navigate a complex economic environment.

Lowe’s faces ongoing challenges from inflation and high-interest rates that suppress demand for home improvement projects. Target must balance a cautious consumer base with external pressures like inventory shrinkage and tightening margins. Nvidia remains a powerhouse in the AI sector but must address supply chain bottlenecks and profitability concerns to maintain its momentum.

While these companies’ near-term outlooks blend optimism and caution, their ability to adapt and communicate clear strategies will be critical in determining their trajectories through the remainder of the fiscal year and beyond.

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