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Category: Stock Market and Lowe's
Date: 21 November 2019 Stock Price: $117.83 We take a look at the 3rd quarter 2019 earnings report of Lowe's a home improvement company serving more than 18 million customers a week.
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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 3rd quarter 2019 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
- Cash generated from operations (for the 3 quarters of their fiscal 2019): $4,111 billion
- Cash generated from operations per share (for the 3 quarters of their fiscal 2019): $5.33
Lowe's management commentary on their 3rd quarter 2019 earnings report and guidance
MOORESVILLE, N.C., Nov. 20, 2019 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $1.0 billion and diluted earnings per share of $1.36 for the quarter ended Nov. 1, 2019,
"We were pleased with the performance of our U.S. home improvement stores, which reflects a solid macroeconomic backdrop and continued progress in our transformation driven by investments in customer experience, improved merchandise category performance, and continued growth of our Pro business. Due to improved execution, we delivered strong earnings per share growth, and as a result, we are raising our adjusted earnings per share and adjusted operating income guidance for 2019," commented Marvin R. Ellison, Lowe's president and CEO.
"Although we still have work to do, I am confident we are on the right path to build a better Lowe's and generate long-term profitable growth. We are committed to the Canadian market and are taking decisive action to improve the performance and profitability of our Canadian operations. We also have a detailed roadmap and a very experienced team in place to repair our Lowes.com business. As we enter the fourth quarter, we are building strong momentum in the U.S. and are well positioned to deliver strong topline performance, while also driving margin improvement and operational efficiency. We are excited about the progress we've made and the opportunity that lies ahead. I would like to thank our associates for their commitment and dedication to serving our customers and communities," added Ellison.
"We were pleased with the performance of our U.S. home improvement stores, which reflects a solid macroeconomic backdrop and continued progress in our transformation driven by investments in customer experience, improved merchandise category performance, and continued growth of our Pro business. Due to improved execution, we delivered strong earnings per share growth, and as a result, we are raising our adjusted earnings per share and adjusted operating income guidance for 2019," commented Marvin R. Ellison, Lowe's president and CEO.
"Although we still have work to do, I am confident we are on the right path to build a better Lowe's and generate long-term profitable growth. We are committed to the Canadian market and are taking decisive action to improve the performance and profitability of our Canadian operations. We also have a detailed roadmap and a very experienced team in place to repair our Lowes.com business. As we enter the fourth quarter, we are building strong momentum in the U.S. and are well positioned to deliver strong topline performance, while also driving margin improvement and operational efficiency. We are excited about the progress we've made and the opportunity that lies ahead. I would like to thank our associates for their commitment and dedication to serving our customers and communities," added Ellison.
Delivering on its commitment to return excess cash to shareholders, the company repurchased $835 million of stock under its share repurchase program and paid $428 million in dividends in the third quarter. As of Nov. 1, 2019, Lowe's operated 2,004 home improvement and hardware stores in the United States and Canada representing 208.9 million square feet of retail selling space.
Lowe's Business Outlook
The company has updated its GAAP business outlook to reflect pre-tax operating costs and charges associated with its Canadian restructuring, as well as its expectations for fourth quarter operating results. The company has raised its 2019 adjusted operating margin and adjusted diluted earnings per share outlook, reflecting its expectations for fourth quarter operating results.
Fiscal Year 2019 (comparisons to fiscal year 2018)
Lowe's Business Outlook
The company has updated its GAAP business outlook to reflect pre-tax operating costs and charges associated with its Canadian restructuring, as well as its expectations for fourth quarter operating results. The company has raised its 2019 adjusted operating margin and adjusted diluted earnings per share outlook, reflecting its expectations for fourth quarter operating results.
Fiscal Year 2019 (comparisons to fiscal year 2018)
- Total sales are expected to increase approximately 2 percent.
- Comparable sales are expected to increase approximately 3 percent.
- Operating income as a percentage of sales (operating margin) is expected to increase 290 to 320 basis points.
- Adjusted operating income as a percentage of sales (adjusted operating margin1) is expected to increase 40 to 60 basis points.
- The effective income tax rate and adjusted effective income tax rate are expected to be approximately 24%.
- The target leverage ratio is 2.75x, therefore the company expects to repurchase approximately $4 billion of stock.
- Diluted earnings per share of $5.35 to $5.47 are expected for the fiscal year ending Jan. 31, 2020.
- Adjusted diluted earnings per share of $5.63 to $5.70 are expected for the fiscal year ending Jan. 31, 2020.
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 coverage of Lowe's
The extract below discusses the latest regarding Lowe's as obtained from TheStreet.com
Lowe's Cos. (LOW - Get Report) before the open on Wednesday reported mixed earnings results and the home-improvement retailer's shares traded to a record on upbeat guidance. The opening high was $121.22, and my call is to book profit on strength to its quarterly risky level at $123.11. Before the earnings report, the technicals were optimistic, with a golden cross on the daily chart and a positive weekly chart.
Lowe's beat earnings-per-share estimates but missed on revenue. Investors ignored the mixed report and applauded the boost to full-year 2019 guidance. Here's the analysis of the earnings report in TheStreet.com. The stock closed Tuesday at $113.40, up 23% year to date and in bull-market territory up 32% from its Dec. 24 low of $85.90. d a dividend yield of 1.9%, according to Macrotrends.
Read the full article here
Lowe's Cos. (LOW - Get Report) before the open on Wednesday reported mixed earnings results and the home-improvement retailer's shares traded to a record on upbeat guidance. The opening high was $121.22, and my call is to book profit on strength to its quarterly risky level at $123.11. Before the earnings report, the technicals were optimistic, with a golden cross on the daily chart and a positive weekly chart.
Lowe's beat earnings-per-share estimates but missed on revenue. Investors ignored the mixed report and applauded the boost to full-year 2019 guidance. Here's the analysis of the earnings report in TheStreet.com. The stock closed Tuesday at $113.40, up 23% year to date and in bull-market territory up 32% from its Dec. 24 low of $85.90. d a dividend yield of 1.9%, according to Macrotrends.
Read the full article here
Lowe's (NYSE: LOW) latest stock valuation
So what do we value Lowe's at based on their 3rd quarter 2019 earnings report and their fiscal guidance provided? Based on Lowe's earnings report and the fiscal guidance provided our valuation model provides a target (full value) price for Lowe's stock at $117.10 (up from our 2nd quarter earnings review of Lowe's). We therefore believe the stock of Lowe's is close to being fully valued
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 $117.10. A good entry point into Lowe's would therefore be at $105.40 or below. We expect the stock of Lowe's to trade in a narrow range around our target (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 $117.10. A good entry point into Lowe's would therefore be at $105.40 or below. We expect the stock of Lowe's to trade in a narrow range around our target (full value) price in coming weeks and months.
Next earnings release of Lowe's
It is expected that Lowe's will release their 4th quarter and full fiscal 2019 earnings report in late February 2020