Lowe's Undervalued After Earnings Miss

Wide-moat

After incorporating this quarter’s results into our model, we don’t plan any material change to our $93 fair value estimate, and we view shares as undervalued. Our prior 2017 forecast included sales growth of 5% and same-store sales of 3.5%, which should remain in place. Lowe’s commentary that July same-store sales of 7.9% were on the upswing over the second quarter was positive, but guidance of 3.5% same-store sales for the year indicate the second half could deliver same-store sales of 3.5%-4%. Our long-term outlook includes same store sales that slow to a 2% pace, supporting low-single-digit revenue growth and slight annual operating margin expansion, leading to operating margins of 12% over the next decade.

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