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Category: Stock Market and Lowe's (LOW)
Date: 19 August 2020 Lowe's (LOW) Stock Price: $157.91 We take a look at the 2nd quarter 2020 earnings report of Lowe's a home improvement company serving more than 18 million customers a week. The group reported very strong growth in revenues with it increasing 30.5% compared to the same quarter of the previous year and reported net earnings of $2.82 billion for the quarter.
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Our highest priority has always been protecting the health and safety of our associates and customers through a safe store environment and shopping experience. We are incredibly proud of our associates, and we are grateful for their hard work and ongoing commitment to safety - Marvin R. Ellison, Lowe's 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 2020 earnings report
Data below refers to the latest quarters data unless specified otherwise:
- Net sales $27.302 billion (up from $20.922 billion for the same quarter of the previous year)
- Net sales increased by 30.5% over the last 12 months
- Cost of sales: $17.998 billion (up from $14.252 billion for the same quarter of the previous year)
- Cost of sales increased by 26.3% over the last 12 months
- Net earnings: $2.828 billion (up from $1.676 billion for the same quarter of the previous year)
- Diluted earnings per share: $3.74 (up from $2.14 for the same quarter of the previous year)
- PE ratio of Lowe's (LOW): 14.1
- Cash dividends per share: $ 0.55 (up from $ 0.48 for the same quarter of the previous year)
- Dividend yield: 1.4%
- Diluted number of shares in issue: 753 million (down from 781 million for the same quarter of the previous year)
- Cash and cash equivalents: $11.641 billion
- Cash and cash equivalents per share: $15.46
- Cash and cash equivalents makes up 9.8% of Lowe's market capital
- Cash and cash equivalents makes up 22.4% of Lowe's total assets
- Merchandise inventory - net: $13.831 billion
- Merchandise inventories increased by 0.74% over the last 12 months
- Merchandise inventories makes up 26.7% of Lowe's total assets
- Total stockholders equity: $4.356 billion
- Stockholders equity per share: $5.78
- Lowe's is trading at 27.3 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
- Cash generated from operations (for the 2 quarters of their fiscal 2020): $11.752 billion
- Cash generated from operations per share (for the 2 quarters of their fiscal 2020): $15.60
Lowe's management commentary on their 2nd quarter 2020 earnings report and guidance
MOORESVILLE, N.C., Aug. 19, 2020 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $2.8 billion and diluted earnings per share (EPS) of $3.74 for the quarter ended July 31, 2020, compared to net earnings of $1.7 billion and diluted EPS of $2.14 in the second quarter of 2019. Second quarter adjusted diluted EPS of $3.75 was 74 percent higher than adjusted diluted EPS of $2.15 in the second quarter of 2019
In the second quarter, the Company invested $460 million in support of frontline hourly associates, communities and store safety. Through the first half of 2020, Lowe's has invested $560 million in COVID-related financial support for its associates and $100 million in community pandemic relief, with a focus on minority and rural small businesses and health care workers. Additionally, the Company's second quarter performance resulted in a record quarterly "Winning Together" profit-sharing bonus for its hourly associates at 100% of its stores, which totaled $107 million. For further information on the Company's safety protocols in response to COVID-19, please visit corporate.lowes.com/covid-19-response.
In the second quarter, the Company invested $460 million in support of frontline hourly associates, communities and store safety. Through the first half of 2020, Lowe's has invested $560 million in COVID-related financial support for its associates and $100 million in community pandemic relief, with a focus on minority and rural small businesses and health care workers. Additionally, the Company's second quarter performance resulted in a record quarterly "Winning Together" profit-sharing bonus for its hourly associates at 100% of its stores, which totaled $107 million. For further information on the Company's safety protocols in response to COVID-19, please visit corporate.lowes.com/covid-19-response.
"Our highest priority has always been protecting the health and safety of our associates and customers through a safe store environment and shopping experience. We are incredibly proud of our associates, and we are grateful for their hard work and ongoing commitment to safety," commented Marvin R. Ellison, Lowe's president and CEO.
"We delivered very strong second quarter results, with all merchandising divisions posting comparable sales growth exceeding 20% and all U.S. geographic regions delivering comparable sales growth of at least 30%. Sales were driven by a consumer focus on the home, core repair and maintenance activities, and wallet share shift away from other discretionary spending. Through our retail fundamentals strategy, we have dramatically improved our technology and operational platforms, which enabled us to meet customer demand and grow our business. Looking ahead, our sales momentum continues into August, and we are investing in the business to further our omnichannel capabilities and position the Company to deliver long-term value to associates, customers and shareholders," added Mr. Ellison.
As of July 31, 2020, Lowe's operated 1,968 home improvement and hardware stores in the United States and Canada representing 208 million square feet of retail selling space.
A conference call to discuss second quarter 2020 operating results is scheduled for today, Wednesday, August 19, at 9:00 am ET. The conference call will be available by webcast and can be accessed by visiting Lowe's website at ir.lowes.com and clicking on Lowe's Second Quarter 2020 Earnings Conference Call Webcast. Supplemental slides will be available approximately 15 minutes prior to the start of the conference call. A replay of the call will be archived at ir.lowes.com.
Lowe's Business Outlook
On May 20, 2020, the Company withdrew its financial guidance for fiscal year 2020 due to 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.
"We delivered very strong second quarter results, with all merchandising divisions posting comparable sales growth exceeding 20% and all U.S. geographic regions delivering comparable sales growth of at least 30%. Sales were driven by a consumer focus on the home, core repair and maintenance activities, and wallet share shift away from other discretionary spending. Through our retail fundamentals strategy, we have dramatically improved our technology and operational platforms, which enabled us to meet customer demand and grow our business. Looking ahead, our sales momentum continues into August, and we are investing in the business to further our omnichannel capabilities and position the Company to deliver long-term value to associates, customers and shareholders," added Mr. Ellison.
As of July 31, 2020, Lowe's operated 1,968 home improvement and hardware stores in the United States and Canada representing 208 million square feet of retail selling space.
A conference call to discuss second quarter 2020 operating results is scheduled for today, Wednesday, August 19, at 9:00 am ET. The conference call will be available by webcast and can be accessed by visiting Lowe's website at ir.lowes.com and clicking on Lowe's Second Quarter 2020 Earnings Conference Call Webcast. Supplemental slides will be available approximately 15 minutes prior to the start of the conference call. A replay of the call will be archived at ir.lowes.com.
Lowe's Business Outlook
On May 20, 2020, the Company withdrew its financial guidance for fiscal year 2020 due to 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 $71.10 and its currently trading at $157.91. Thats a 122.1% 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 $160.60 than it is to its 52 week low of $60 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 of $160.60 than it is to its 52 week low of $60 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 The Home Depot has narrowly outperformed that of smaller rival, Lowe's
- The Home Depot (HD): 148.4%
- Lowe's (LOW): 131.7%
Over the 5 year period the stock of The Home Depot has narrowly outperformed that of smaller rival, Lowe's
Recent coverage of Lowe's (LOW)
The extract below discusses the latest regarding Lowe's as obtained from CNBC.com
Lowe’s on Wednesday blew past Wall Street forecasts with a 30% surge in revenue and 68.7% jump in profit as consumers shifted spending from restaurants and travel to home improvement projects during the coronavirus pandemic.
Shares of the company rose less than 1% in premarket trading.
Here’s what the company reported for the quarter ended July 31 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Lowe’s profits soared 68.7% to $2.83 billion, or $3.74 per share, up from $1.68 billion, or $2.14 per share, a year earlier even as it spent more money to keep employees at work and safe during the pandemic. The company said it spent $460 million during the quarter on higher pay for hourly workers, store safety and supporting communities. It also will pay out a record quarterly bonus of $107 million to employees at all of its locations for surpassing its targets.
Read the full article here
Lowe’s on Wednesday blew past Wall Street forecasts with a 30% surge in revenue and 68.7% jump in profit as consumers shifted spending from restaurants and travel to home improvement projects during the coronavirus pandemic.
Shares of the company rose less than 1% in premarket trading.
Here’s what the company reported for the quarter ended July 31 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Adjusted EPS: $3.75 vs. $2.95 expected
- Revenue: $27.3 billion vs. $24.27 billion expected
Lowe’s profits soared 68.7% to $2.83 billion, or $3.74 per share, up from $1.68 billion, or $2.14 per share, a year earlier even as it spent more money to keep employees at work and safe during the pandemic. The company said it spent $460 million during the quarter on higher pay for hourly workers, store safety and supporting communities. It also will pay out a record quarterly bonus of $107 million to employees at all of its locations for surpassing its targets.
Read the full article here
Lowe's (NYSE: LOW) latest stock valuation
So what do we value Lowe's at based on their 2nd quarter 2020 earnings report? Based on Lowe's earnings report our valuation model provides a target price (full value price) for Lowe's stock at $149.60 (up from our 1st quarter 2020 earnings review of Lowe's). We therefore believe the stock of Lowe's is overvalued at its stock price of $157.91
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 $149.60. A good entry point into Lowe's would therefore be at $134.60 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 price (full value price) which in this case is $149.60. A good entry point into Lowe's would therefore be at $134.60 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