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Category: Stock Market and Lowe's
Date: 20 May 2020 Stock Price: $116.87 We take a look at the 1st quarter 2020 earnings report of Lowe's a home improvement company serving more than 18 million customers a week. The stock is up over 6% in pre market trade. So it looks like the markets are liking their results.
In late February, we shifted our priorities in response to the COVID-19 pandemic, and immediately focused on how best to serve the needs of our communities during this unprecedented time." |
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 1st quarter 2020 earnings report
Data below refers to the latest quarters data unless specified otherwise:
- Net sales $17.388 billion (down from $17.415 billion for the same quarter of the previous year)
- Net sales decreased by -0.15% over the last 12 months
- Cost of sales: $11.748 billion (down from $12.038 billion for the same quarter of the previous year)
- Cost of sales decreased by -2.4% over the last 12 months
- Net earnings: $ 1.049 billion (up from $629 million for the same quarter of the previous year)
- Diluted earnings per share: $1.36 (up from $0.78 for the same quarter of the previous year)
- Cash dividends per share: $ 0.55 (up from $ 0.48 for the same quarter of the previous year)
- Dividend yield: 1.86%
- Diluted number of shares in issue: 770 million (down from 807 million for the same quarter of the previous year)
- Cash and cash equivalents: $794 million
- Cash and cash equivalents per share: $1.03
- Cash and cash equivalents makes up 0.87% of Lowe's market capital
- Cash and cash equivalents makes up 1.99% of Lowe's total assets
- Merchandise inventory - net: $13.716 billion
- Merchandise inventories increased by 10.9% over the last 12 months
- Merchandise inventories makes up 34.5% of Lowe's total assets
- Total stockholders equity: $2.458 billion
- Stockholders equity per share: $3.19
- Lowe's is trading at 36 times its stockholders equity per share, which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
Lowe's management commentary on their 1st quarter 2020 earnings report and guidance
MOORESVILLE, N.C., May 20, 2020 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $1.3 billion and diluted earnings per share (EPS) of $1.76 for the quarter ended May 1, 2020, compared to a net earnings of $1.0 billion and diluted EPS of $1.31 in the first quarter of 2019. First quarter adjusted diluted EPS of $1.77 was 45 percent higher than adjusted diluted EPS of $1.22 in the first quarter of 2019.
In late February, we shifted our priorities in response to the COVID-19 pandemic, and immediately focused on how best to serve the needs of our communities during this unprecedented time. Our highest priority remains the health and safety of our associates and community, and we have demonstrated that commitment in the first quarter through an investment of $340 million, including support for healthcare workers and first responders," commented Marvin R. Ellison, Lowe's president and CEO. "We also enhanced the safety of our operations by shortening our store operating hours in early March, so we could increase cleaning protocols and restock shelves. And during the hours that our stores were open, we implemented significant operational changes to best facilitate social distancing," added Mr. Ellison.
In late February, we shifted our priorities in response to the COVID-19 pandemic, and immediately focused on how best to serve the needs of our communities during this unprecedented time. Our highest priority remains the health and safety of our associates and community, and we have demonstrated that commitment in the first quarter through an investment of $340 million, including support for healthcare workers and first responders," commented Marvin R. Ellison, Lowe's president and CEO. "We also enhanced the safety of our operations by shortening our store operating hours in early March, so we could increase cleaning protocols and restock shelves. And during the hours that our stores were open, we implemented significant operational changes to best facilitate social distancing," added Mr. Ellison.
"I am tremendously proud of our associates and how they rose to meet the challenges of this global health crisis, and have continued to serve their communities, providing our customers with the essential products and services they need to keep their homes safe and functional, and their businesses running."
"Our strong first quarter performance, which continues into May, also reflects the benefits of our retail fundamentals strategy, the improvement in our execution, and the resiliency of our home improvement business model. I am also pleased with our ability to pivot to serve increased online demand with Lowes.com sales increasing 80% in the quarter," concluded Ellison.
Lowe's Business Outlook
The Company is withdrawing its financial guidance for fiscal year 2020. The Company delivered strong financial performance in the first quarter, with continued sales momentum in May. However, there is limited visibility into future business trends in this unprecedented operating environment, which results in an unusually wide range of potential outcomes for 2020 financial performance.
"Our strong first quarter performance, which continues into May, also reflects the benefits of our retail fundamentals strategy, the improvement in our execution, and the resiliency of our home improvement business model. I am also pleased with our ability to pivot to serve increased online demand with Lowes.com sales increasing 80% in the quarter," concluded Ellison.
Lowe's Business Outlook
The Company is withdrawing its financial guidance for fiscal year 2020. The Company delivered strong financial performance in the first quarter, with continued sales momentum in May. However, there is limited visibility into future business trends in this unprecedented operating environment, which results in an unusually wide range of potential outcomes for 2020 financial performance.
Lowe's (NYSE: LOW) stock price history
The image below, obtained from Google shows Lowe's stock chart for the last 5 years. Its been a good time for Lowe stockholders over the last 5 years. 5 years ago the stock of Lowe's was trading at around $63.30 and its currently trading at $117.83. Thats a 86.2% return provided to Lowe's stockholders over the last 5 years. Lowe's is trading at a lot closer to its 52 week high of $121.22 than it is to its 52 week low of $84.75 which to us is a clear indication that the short term sentiment and momentum of Lowe's stock is very positive right now.
Recent Google search trends for LOW stock price
The graphic below shows google search trends for LOW stock price over the last 12 months in the United States as obtained from Google Trends. As the graphic shows there was a sharp increases in searches for LOW stock price in mid March 2020, which coincided with sharp declines in the stock of LOW due to the coronavirus pandemic triggered sell off in world markets.
Lowes (NYSE: LOW) stock performance compared to that of The Home Depot (NYSE: HD)
The image below shows the stock performance of Lowes (LOW) and The Home Depot (HD) over the last 3 years. Over the last 3 years Lowes returned 47.12% while The Home Depot returned 53.82%. The trends and scale of the the movements between Lowes and Home Depot are very similar
Recent coverage of Lowe's
The extract below discusses the latest regarding Lowe's as obtained from CNBC.com
Lowe’s shares jumped Wednesday after the company reported better-than-expected earnings. Share prices were up nearly 6% after rising more than 7% at one point during premarket trading. Here’s what Lowe’s reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
However, it’s difficult to compare reported earnings with analyst estimates for the first quarter because the coronavirus pandemic has changed customers’ shopping patterns and added additional labor and safety costs for companies.For the first quarter ended May 1, Lowe’s reported that net income rose 27.6% to $1.34 billion, or $1.76 per share, compared to earnings of $1.05 billion, or $1.31 per share, a year ago. Excluding items, the company earned $1.77 per share, outpacing analyst expectations of $1.32 per share.Revenue rose 10.9% to $19.68 billion, up from $17.74 billion a year ago.The company also announced it is withdrawing its full-year 2020 guidance due to uncertainty related to the coronavirus pandemic.
Read the full article here
Lowe’s shares jumped Wednesday after the company reported better-than-expected earnings. Share prices were up nearly 6% after rising more than 7% at one point during premarket trading. Here’s what Lowe’s reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $1.77, adjusted vs. $1.32 expected
- Revenue: $19.68 billion vs. $18.32 billion expected
- Same-store sales: up 11.2% vs. 3.3% expected
However, it’s difficult to compare reported earnings with analyst estimates for the first quarter because the coronavirus pandemic has changed customers’ shopping patterns and added additional labor and safety costs for companies.For the first quarter ended May 1, Lowe’s reported that net income rose 27.6% to $1.34 billion, or $1.76 per share, compared to earnings of $1.05 billion, or $1.31 per share, a year ago. Excluding items, the company earned $1.77 per share, outpacing analyst expectations of $1.32 per share.Revenue rose 10.9% to $19.68 billion, up from $17.74 billion a year ago.The company also announced it is withdrawing its full-year 2020 guidance due to uncertainty related to the coronavirus pandemic.
Read the full article here
Lowe's (NYSE: LOW) latest stock valuation
So what do we value Lowe's at based on their 1st quarter 2020 earnings report ? Based on Lowe's earnings report our valuation model provides a target (full value price) for Lowe's stock at $112.60. We therefore believe the stock of Lowe's is close to being fully valued at its stock price of $116.87
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $112.60. A good entry point into Lowe's would therefore be at $101.40 or below. We expect the stock of Lowe's to trade in a narrow range around our target price (full value price) in coming weeks and months.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target (full value) price which in this case is $112.60. A good entry point into Lowe's would therefore be at $101.40 or below. We expect the stock of Lowe's to trade in a narrow range around our target price (full value price) in coming weeks and months.
Next earnings release of Lowe's
It is expected that Lowe's will release their 2nd quarter 2020 earnings report in late August 2020