Lowe’s Hits Record High in Pre-Market Trading After Q3 Earnings Beat

Lowe’s shares hit a new record high on Wednesday after the Mooresville, North Carolina-based home improvement retailer reported better-than-expected earnings in the third quarter and lifted its full-year sales forecast.

The home improvement retailer reported net earnings of $1.9 billion and diluted earnings per share (EPS) of $2.73 for the quarter ended October 29 compared to net earnings of $692 million and diluted EPS of $0.91 in the third quarter of 2020.

Excluding charges in the prior-year period related to the extinguishment of debt, third-quarter diluted EPS of $2.73 increased 38% from adjusted diluted EPS of $1.98 in the third quarter of 2021. That was higher than the market expectations of $2.33 per share.

Total sales for the third quarter were $22.9 billion compared to $22.3 billion in the third quarter of 2020, and comparable sales increased 2.2%, beating the Wall Street estimates of a 2.9% decline. Comparable sales for the U.S. home improvement business increased 2.6% for the third quarter.

Following this, Lowe’s shares rose over 3.5% to $253.50 in pre-market trading on Wednesday. The stock rose nearly 60% so far this year.

Analyst Comments

“Results solid, show top-line health and most importantly, a well-managed business in the face of supply chain/cost challenges. Home Improvement channel the best inflation hedge in Hardline/Broadline retail thus far,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We view Lowe’s (LOW) favourably given its longer-term transformation opportunity and structural industry tailwinds, with substantial near-term uplifts from COVID-19 spending shifts that likely translate to longer-term sales retention. Assuming a healthy underlying housing backdrop, we think comps can accelerate longer-term from stronger sales/sq ft trends, driven by e-comm accelerating, better in-stocks, product refreshes/exclusive launches, greater traction with Pro initiatives, and removing friction from the customer shopping experience.”

Lowe’s Stock Price Forecast

Fourteen analysts who offered stock ratings for Lowe’s in the last three months forecast the average price in 12 months of $241.82 with a high forecast of $265.00 and a low forecast of $217.00.

The average price target represents a -1.21% change from the last price of $244.78. From those 14 analysts, 11 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Technical analysis suggests it is good to buy as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong buying opportunity.

Morgan Stanley gave the base target price of $255 with a high of $310 under a bull scenario and $150 under the worst-case scenario. The firm gave an “Overweight” rating on the home improvement retailer’s stock.

Several other analysts have also updated their stock outlook. Piper Sandler raised the target price to $231 from $225. Telsey Advisory Group lifted the target price to $250 from $240. Citigroup upped the price target to $270 from $239.