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Lowe's (LOW) Beats Q3 Earnings, Keeps FY15 Outlook Intact

Zacks Equity Research
Updated

After ending the second quarter on a soft note, Lowe’s Companies Inc. LOW posted strong results for the third quarter of fiscal 2015 wherein both top and bottom lines surpassed the Zacks Consensus Estimate. Shares are up roughly 2% during pre-market trading hours.

The company’s earnings per share of 80 cents were a couple of cents ahead of the Zacks Consensus Estimate of 78 cents and increased 35.6% from 59 cents reported in the prior-year quarter.
 

Lowe's Companies Inc. (LOW) - Earnings Surprise | FindTheCompany

The company’s total revenue rose 5% rise to $14,360 million and also came ahead of the Zacks Consensus Estimate of $14,306 million.

Comparable-store sales (comps) increased 4.6% on a consolidated basis during the fiscal quarter while U.S. comps grew 5%.

In dollar terms, gross profit rose 5.8% year over year to $4,990 million and gross profit margin expanded 26 basis points (bps) to 34.8%, mainly due to increase in total revenue.

Other Financial Aspects

Lowe’s ended the quarter with cash and cash equivalents of $1,227 million, long-term debt (excluding current maturities) of $11,541 million and shareholders’ equity of $8,378 million.

During the quarter, the company repurchased $750 million worth of its common stock and distributed $260 million as dividends.

Fiscal 2015 Outlook Reiterated

Lowe’s reiterated its fiscal 2015 guidance. The company continues to expect sales growth of 4.5–5% while comps, on a consolidated basis, for the year are estimated to grow in the range of 4–4.5%. Operating margin is expected to expand by nearly 80 bps to 100 bps.

Further, Lowe’s still expects earnings for fiscal 2015 to be $3.29 per share, which is in sync with the Zacks Consensus Estimate.

Moreover, the company intends to open 15—20 home improvement and hardware stores during the fiscal. As of Oct 30, 2015, the company operated 1,849 stores in the United States, Canada and Mexico.

Currently, Lowe’s carries a Zacks Rank #3 (Hold).

Stocks to Consider

A couple of better-ranked stocks in the same industry include The Home Depot, Inc. HD and Tile Shop Holdings Inc. TTS, both carrying a Zacks Rank #2 (Buy). Another stock in the related industry worth considering is Restoration Hardware Holdings Inc. RH with a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
HOME DEPOT (HD): Free Stock Analysis Report
 
LOWES COS (LOW): Free Stock Analysis Report
 
RESTORATION HDW (RH): Free Stock Analysis Report
 
TILE SHOP HLDGS (TTS): Free Stock Analysis Report
 
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Zacks Investment Research