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Lowe's Companies Inc LOW

Morningstar Rating
$253.73 +0.40 (0.16%)
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Company Report

We Still Expect Single-Family Construction and Repair and Remodel Spending to Grow in 2024

New single-family home sales increased 4% in 2023 to 666,000 units, as homebuilders capitalized on a dearth of existing for-sale inventory while also offering more sales incentives, cutting base home prices, and building smaller homes to improve affordability. By the fourth quarter of 2023, homebuilders began to pull back on sales incentives as the average 30-year fixed mortgage rate retreated from 7.62% in October 2023 to 6.64% in January 2024. However, mortgage rates have trended higher recently, and we now forecast the average 30-year fixed rate will be 6.50% in 2024, up from our previous forecast of 6.10%. Even so, that’s lower than the 2023 average of 6.81%, and we think homebuilders won’t hesitate to increase sales incentives if needed; they still enjoyed above-average gross profit margins last year with elevated incentives. As such, in 2024, we think new-home sales will increase 9% to 730,000 units and single-family housing starts will increase 4% to 985,000 units. However, we expect total housing starts will decline roughly 5% to 1,345,000 units due to a 23% decline in multifamily starts to 360,000 units, as there’s currently approximately 1,000,000 multifamily units under construction—the largest backlog in at least 50 years.

Price vs Fair Value

LOW is trading at a 20% premium.
Price
$254.00
Fair Value
$222.00
Uncertainty
Medium
1-Star Price
$722.13
5-Star Price
$567.20
Economic Moat
Knq
Capital Allocation
Ddtczqlqs

Bulls Say, Bears Say

Bulls

The divestiture of dilutive Canadian business structurally lifted Lowe's profitability profile. With continued focus on extracting inefficiencies, Lowe's is set to reach midteens operating margin longer term.

Bears

The closure of smaller peers may intermittently lead to competitive pricing pressures at Lowe's, constraining ROIC expansion and limiting sales growth.

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News

Trading Information

Previous Close Price
$253.33
Day Range
$250.93254.40
52-Week Range
$181.85262.34
Bid/Ask
$253.67 / $253.78
Market Cap
$145.19 Bil
Volume/Avg
687,701 / 2.5 Mil

Key Statistics

Price/Earnings (Normalized)
19.39
Price/Sales
1.71
Dividend Yield (Trailing)
1.72%
Dividend Yield (Forward)
1.74%
Total Yield
5.95%

Company Profile

Lowe's is the second-largest home improvement retailer in the world, operating more than 1,700 stores in the United States, after the 2023 divestiture of its Canadian locations (RONA, Lowe’s Canada, Réno-Dépôt, and Dick’s Lumber). The firm’s stores offer products and services for home decorating, maintenance, repair, and remodeling, with maintenance and repair accounting for two thirds of products sold. Lowe's targets retail do-it-yourself (around 75% of sales) and do-it-for-me customers as well as commercial and professional business clients (around 25% of sales). We estimate Lowe's captures a high-single-digit share of the domestic home improvement market, based on U.S. Census data and management’s market size estimates.
Sector
Consumer Cyclical
Industry
Home Improvement Retail
Stock Style Box
Large Value
Total Number of Employees
284,000

Competitors

Valuation

Metric
LOW
WMT
HD
Price/Earnings (Normalized)
19.3927.4624.77
Price/Book Value
5.83366.67
Price/Sales
1.710.762.53
Price/Cash Flow
14.2714.5720.26
Price/Earnings
LOW
WMT
HD

Financial Strength

Metric
LOW
WMT
HD
Quick Ratio
0.060.200.32
Current Ratio
1.230.831.35
Interest Coverage
7.798.9411.16
Quick Ratio
LOW
WMT
HD

Profitability

Metric
LOW
WMT
HD
Return on Assets (Normalized)
18.05%6.48%20.23%
Return on Equity (Normalized)
20.75%1,345.87%
Return on Invested Capital (Normalized)
35.63%12.00%32.69%
Return on Assets
LOW
WMT
HD
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