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Lowe’s Earnings: Tumultuous Macro Weighs on Near-Term Results but Fails to Sway Our Long-Term View

Even with a 3% price drop following the report, Lowe’s stock appears rich.

An exterior view of a Lowe's home improvement store.
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Lowe's Companies Inc

Key Morningstar Metrics for Lowe’s Companies

What We Thought of Lowe’s Companies’ Earnings

Lowe’s LOW fiscal 2024 first-quarter report held few surprises. $21.4 billion in sales aligned closely with our $21.1 billion estimate, as did $3.06 in diluted earnings per share with our $3.08 estimate. The results prompted management to reaffirm its full-year outlook of $84 billion-$85 billion in revenue and 12.6%-12.7% in operating margin. As the reiterated guidance squares with our forecasts of $84.3 billion for revenue and 12.7% for operating margin, our fair value estimate of $211 per share shouldn’t see a material change beyond time value. Even with a 3% price drop following the report, shares appear rich.

Comparable sales dropped 4.1%, and a 7.6% decline in discretionary purchases over $500 signaled macro pressures are yet to abate. However, similar to our view of peer Home Depot HD, we anticipate the comp cadence will improve throughout the year with easier comparisons (we model a 2.5% decline for fiscal 2024). Ultimately, we believe Lowe’s is poised for further market and wallet share gains as it makes prudent investments to enhance customer experience while leveraging its extensive scale, ensuring its brand intangible asset holds. In particular, we favorably view its new loyalty program for DIY customers, which we think could raise touchpoints and drive stickiness as the firm continues expanding its service levels and investing in supply chain and digital capabilities to better serve its pro base.

Operating margin fell 200 basis points to 12.4%, primarily as Lowe’s lapped a favorable legal settlement and on weak sales, which was partially offset by productivity initiatives. We maintain that 14%-15% long-term operating margins remain within reach (from 13.4% in fiscal 2023) as the firm strives for productivity gains and operational efficiencies across its business.

Lowe's Companies Stock vs. Morningstar Fair Value Estimate

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Authors

Jaime M. Katz, CFA

Senior Equity Analyst
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Jaime M. Katz, CFA, is a senior equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She covers home improvement retailers and travel and leisure.

Before joining Morningstar in 2011, Katz was an associate for Credit Agricole Corporate and Investment Bank. She also worked in equity research for William Blair for three years and spent three years in asset management at Mesirow Financial.

Katz holds a bachelor’s degree in economics from the University of Wisconsin and a master’s degree in business administration from the University of Chicago Booth School of Business. She also holds the Chartered Financial Analyst® designation. She ranked first in the leisure goods and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

Grace Na

Associate Equity Analyst
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Grace Na is an associate equity analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She conducts a variety of research and related analysis on companies that fall into the consumer defensive and consumer cyclical sectors.

Before joining Morningstar in 2021, Na spent several months interning at a deal advisory group at KPMG Korea and a Chicago-based private equity firm, where she conducted various qualitative research on both public and private markets.

Na holds a bachelor's degree in finance, investment, and banking from the University of Wisconsin–Madison's Wisconsin School of Business.

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