Lowe's Companies (LOW) earnings report review for the 2nd quarter of their 2021 financial year
Category: Stock Market and Lowe's (LOW)
Date: 20 August 2021 Lowe's (LOW) Stock Price: $202.59 Lowe's Market Capital: $143.2 billion We take a look at the 2nd quarter 2021 earnings report of Lowe's a home improvement company serving more than 18 million customers a week. For the 2nd qaurter the group reported revenues of $27.57 billion and net earnings of $3.018 billion.
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We also delivered significant operating margin expansion through our disciplined focus on driving productivity across the company," commented Marvin R. Ellison, Lowe's chairman, president and CEO "
About Lowe's
Lowe’s Companies, Inc. (NYSE: LOW) is a FORTUNE® 50 home improvement company serving more than 18 million customers a week in the United States and Canada. With fiscal year 2018 sales of $71.3 billion, Lowe’s and its related businesses operate or service more than 2,200 home improvement and hardware stores and employ approximately 300,000 associates. Founded in 1946 and based in Mooresville, N.C., Lowe’s supports the communities it serves through programs focused on creating safe, affordable housing and helping to develop the next generation of skilled trade experts.
Overview of Lowe's 2nd quarter 20201 earnings report
- Consolidated Comparable Sales Decreased 1.6%; U.S. Comparable Sales Decreased 2.2%
- Represents U.S. Comparable Sales Increase on a Two-Year Basis of 32.0%
- Second Quarter Diluted EPS of $4.25
- Raises Fiscal 2021 Financial Outlook
Lowe's management commentary on their 2nd quarter 2021 earnings
MOORESVILLE, N.C., Aug. 18, 2021 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $3.0 billion and diluted earnings per share (EPS) of $4.25 for the quarter ended July 30, 2021 compared to net earnings of $2.8 billion and diluted EPS of $3.74 in the second quarter of 2020. Excluding charges in the prior-year period related to the strategic review of certain operations, second quarter diluted EPS of $4.25 increased 13% from adjusted diluted EPS of $3.75 in the second quarter of 20201.
Total sales for the second quarter were $27.6 billion compared to $27.3 billion in the second quarter of 2020, and comparable sales decreased 1.6%. Comparable sales for the U.S. home improvement business decreased 2.2% for the second quarter.
For the sixth consecutive quarter, 100% of Lowe's stores earned a Winning Together profit-sharing bonus, resulting in an expected total payout of $91 million to front-line hourly associates. This payment is $20 million above the target level.
"Our strong results this quarter demonstrate that our Total Home strategy is working, with U.S. sales comps up 32% on a two-year basis. In the quarter, we drove 21% growth in Pro, 10% growth in Installation Services and strong comps across Décor product categories. On Lowes.com, sales grew 7% on top of 135% growth last year. We also delivered significant operating margin expansion through our disciplined focus on driving productivity across the company," commented Marvin R. Ellison, Lowe's chairman, president and CEO. "I would like to thank our front-line associates for their continued dedication to serving our customers and supporting safety in our stores. Looking forward, I am confident in the positive outlook for our industry, and our ability to drive operating margin expansion and market share gains."
Total sales for the second quarter were $27.6 billion compared to $27.3 billion in the second quarter of 2020, and comparable sales decreased 1.6%. Comparable sales for the U.S. home improvement business decreased 2.2% for the second quarter.
For the sixth consecutive quarter, 100% of Lowe's stores earned a Winning Together profit-sharing bonus, resulting in an expected total payout of $91 million to front-line hourly associates. This payment is $20 million above the target level.
"Our strong results this quarter demonstrate that our Total Home strategy is working, with U.S. sales comps up 32% on a two-year basis. In the quarter, we drove 21% growth in Pro, 10% growth in Installation Services and strong comps across Décor product categories. On Lowes.com, sales grew 7% on top of 135% growth last year. We also delivered significant operating margin expansion through our disciplined focus on driving productivity across the company," commented Marvin R. Ellison, Lowe's chairman, president and CEO. "I would like to thank our front-line associates for their continued dedication to serving our customers and supporting safety in our stores. Looking forward, I am confident in the positive outlook for our industry, and our ability to drive operating margin expansion and market share gains."
Related Topics
Capital Allocation
The Company reinstated its share repurchase program, and repurchased 3.6 million shares for $621 million during the quarter, while it also paid $416 million in dividends.
During the quarter, the Company made a cash tender offer for $3.0 billion of higher-coupon bonds, and issued $4.0 billion of senior unsecured notes at a weighted average interest rate of 2.17%, which is a record low in company history. These actions further strengthened the Company's balance sheet by lowering its annual interest expense.
At quarter-end, the Company had $8.2 billion of cash and cash equivalents as well as $3.0 billion in undrawn capacity on its revolving credit facilities, which will be available for any unanticipated liquidity needs.
As of October 30, 2020, Lowe's operated 1,969 home improvement and hardware stores in the United States and Canada representing 208 million square feet of retail selling space.
The Company reinstated its share repurchase program, and repurchased 3.6 million shares for $621 million during the quarter, while it also paid $416 million in dividends.
During the quarter, the Company made a cash tender offer for $3.0 billion of higher-coupon bonds, and issued $4.0 billion of senior unsecured notes at a weighted average interest rate of 2.17%, which is a record low in company history. These actions further strengthened the Company's balance sheet by lowering its annual interest expense.
At quarter-end, the Company had $8.2 billion of cash and cash equivalents as well as $3.0 billion in undrawn capacity on its revolving credit facilities, which will be available for any unanticipated liquidity needs.
As of October 30, 2020, Lowe's operated 1,969 home improvement and hardware stores in the United States and Canada representing 208 million square feet of retail selling space.
Lowe's (LOW) stock price chart over the last 5 years
The image below shows Lowe's stock chart for the last 5 years. Its been a very good time for Lowe stockholders over the last 5 years. Over the last 5 years the stock of Lowes returned 184.9% to stockholders.
Lowe's is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Lowe's stock is very positive right now.
Lowe's is trading at a lot closer to its 52 week high than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Lowe's stock is very positive right now.
Lowe's (LOW) stock vs The Home Depot (HD) stock over the last 5 years
The image below shows the stock price performance of The Home Depot (HD) and Lowes (LOW) over the last 5 years. And over the 5 year period the stock price trends of the two home improvement giants have been fairly similar. The summary below shows the stock price returns provided by each over the last 5 years, sorted from best to worst performer:
Over the 5 year period the stock of Lowe's has narrowly outperformed that of its bigger rival The Home Depot
- Lowe's (LOW): 184.9%
- The Home Depot (HD): 155.8%
Over the 5 year period the stock of Lowe's has narrowly outperformed that of its bigger rival The Home Depot
Lowe's (LOW) latest stock forecast
So what do we value Lowe's at based on their 2nd quarter 2021 earnings report? Based on Lowe's earnings report and the fiscal guidance provided our valuation model provides a target price (full value price) for Lowe's stock at $240.20
We therefore believe the stock of Lowe's is fully valued at its current stock price of $202.59
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $240.20. A good entry point into Lowe's would therefore be at $216.20 or below.
We expect the stock of Lowe's to kick up in coming weeks and months to levels closer to our target price (full value price) in coming weeks and months and therefore rate the stock of Lowe's as a buy.
We therefore believe the stock of Lowe's is fully valued at its current stock price of $202.59
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $240.20. A good entry point into Lowe's would therefore be at $216.20 or below.
We expect the stock of Lowe's to kick up in coming weeks and months to levels closer to our target price (full value price) in coming weeks and months and therefore rate the stock of Lowe's as a buy.
Next earnings release of Lowe's (LOW)
It is expected that Lowe's will release their 3rd quarter 2021 earnings report in late November 2021