Factors Setting the Tone for Lowe's (LOW) in Q3 Earnings

Lowe's Companies, Inc. LOW is scheduled to report third-quarter fiscal 2019 numbers on Nov 20, before the opening bell.

In the last reported quarter, the company recorded a positive earnings surprise of 7.5%. Further, its bottom line beat estimates by 1.6%, on average, over the trailing four quarters.

The Zacks Consensus Estimate for fiscal third-quarter earnings is pegged at $1.34, indicating rise of 28.9% from $1.04 reported in the year-ago quarter. However, the consensus mark was unchanged in the last 30 days. For revenues, the consensus estimate is pegged at $17,714 million, suggesting an increase of 1.7% from the year-ago quarter’s reported figure.

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

Key Factors to Note

Gains from the Pro business have been driving Lowe's performance. Additionally, sales growth initiatives — including better product presentation, in-store merchandising and enhancing digital presence — have been driving the company’s sales and comparable store sales (comps).

In a bid to continue augmenting sales from Pro customers, it has been boosting Pro-focused brands. Lowe’s has also revamped its Pro-service business website, LowesForPros.com, to give special attention to the needs of its Pro customers. Moreover, management’s focus on improving omni-channel capabilities, enhancing consumers’ digital shopping experience and rationalizing inventory has been working in its favor. We expect the benefits from these initiatives to get reflected in the top line and comps in third-quarter fiscal 2019.

However, the company has been grappling with softness in the margins, stemming from an increase in supply-chain costs. Further, higher customer delivery expenses, adverse product mix shift and inventory shrinks are expected to have weighed on the company’s margins in the fiscal third quarter.

Nonetheless, Lowe’s is undertaking necessary pricing and other actions to battle cost-related headwinds. These efforts might have slightly cushioned the bottom line in the quarter under review.

Zacks Model

Our proven model predicts an earnings beat for Lowe’s this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Lowe’s has a Zacks Rank #2 and an Earnings ESP of +1.62%.

Other Stocks With Favorable Combination

Walmart Inc WMT currently has an Earnings ESP of +2.45% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dollar General Corporation DG has an Earnings ESP of +2.34% and a Zacks Rank #2 at present.

Ross Stores, Inc ROST currently has an Earnings ESP of +4.03% and a Zacks Rank #2.

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