|
Related Topics
|
Category: Stock Market and Lowe's (LOW)
Date: 23 November 2020 Lowe's (LOW) Stock Price: $157.91 We take a look at the 3rd quarter 2020 earnings report of Lowe's a home improvement company serving more than 18 million customers a week. The group reported an increase of 28.3% in net sales to $22.3 billion compared to the same quarter of the previous year and net income of $692 million for the quarter.
|
Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions. and triple-digit growth online. We continued to invest in the future growth of the company, including a $100 million investment in the quarter as part of an ongoing effort to reset the layout of our U.S. stores, making them easier to shop with improved product adjacencies, especially for Pro customers. - 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 3rd 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 3rd quarter 2020 earnings report
MOORESVILLE, N.C., Nov. 18, 2020 /PRNewswire/ -- Lowe's Companies, Inc. (NYSE: LOW) today reported net earnings of $692 million and diluted earnings per share (EPS) of $0.91 for the quarter ended October 30, 2020, which included a $1.1 billion pre-tax loss on extinguishment of debt in connection with the company's third quarter $3.0 billion cash tender offer, compared to net earnings of $1.0 billion and diluted EPS of $1.36 in the third quarter of 2019. Excluding these charges, third quarter adjusted diluted EPS increased 40 percent to $1.98 from adjusted diluted EPS of $1.41 in the third quarter of 2019.
"Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions. and triple-digit growth online. We continued to invest in the future growth of the company, including a $100 million investment in the quarter as part of an ongoing effort to reset the layout of our U.S. stores, making them easier to shop with improved product adjacencies, especially for Pro customers. Our omni-channel transformation continued in the third quarter with further investments in Lowes.com and our supply chain. I remain confident that we are making the right strategic investments to deliver sustainable, long-term growth. I would also like to thank our outstanding frontline associates for their unwavering commitment to customer service and safety," commented Marvin R. Ellison, Lowe's president and CEO.
"Strong execution enabled us to meet continued broad-based demand, as we delivered over 15% growth in all merchandising departments, over 20% growth across all geographic regions. and triple-digit growth online. We continued to invest in the future growth of the company, including a $100 million investment in the quarter as part of an ongoing effort to reset the layout of our U.S. stores, making them easier to shop with improved product adjacencies, especially for Pro customers. Our omni-channel transformation continued in the third quarter with further investments in Lowes.com and our supply chain. I remain confident that we are making the right strategic investments to deliver sustainable, long-term growth. I would also like to thank our outstanding frontline associates for their unwavering commitment to customer service and safety," commented Marvin R. Ellison, Lowe's president and CEO.
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 (NYSE: LOW) stock price history over the last 5 years
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 its slightly smaller rival, Lowe's
- The Home Depot (HD): 105.4%
- Lowe's (LOW): 94.7%
Over the 5 year period the stock of The Home Depot has narrowly outperformed that of its slightly smaller rival, Lowe's
Recent coverage of Lowe's (LOW)
The extract below discusses the latest regarding Lowe's as obtained from Investors.com
Sales at Lowe's (LOW) are booming, as Americans take advantage of record-low borrowing rates to fund home renovations. But is Lowe's stock a buy now? The Mooresville, S.C.-based home-improvement retailer has posted double-digit profit growth for the last five quarters. But consumers may contemplate a shift in spending to activities outside the home following recent news of two effective vaccines. Lowe's has more than 2,200 stores. It opened its first home-improvement store in 1946 and went public in 1961. In 2007, it opened its first stores outside the U.S., in Canada.
The company's stock rose dramatically in the early 1990s, in step with the growing interest in DIY home-improvement trend. Indeed, HGTV launched in December 1994. That year, Lowe's had net sales of $6.1 million. By 2019, that figure grew to $72.1 billion.
Lowe's Stock Fundamental Analysis
Lowe's Q3 earnings per share grew 40.4% to $1.98, though that missed Refinitiv estimates of $1.99, as revenue climbed 28% to $22.31 billion, with same-store sales shooting up 30.1%. But continued costs related to Covid will put pressure on profits. In its Q3 earnings report Lowe's said Covid-related costs to support hourly front-line workers totaled $245 million in Q3 and more than $1.1 billion year to date. That came a day after rival Home Depot (HD) also beat earnings views and announced a $1 billion increase in annual compensation costs for front-line workers.
Read the full article here
Sales at Lowe's (LOW) are booming, as Americans take advantage of record-low borrowing rates to fund home renovations. But is Lowe's stock a buy now? The Mooresville, S.C.-based home-improvement retailer has posted double-digit profit growth for the last five quarters. But consumers may contemplate a shift in spending to activities outside the home following recent news of two effective vaccines. Lowe's has more than 2,200 stores. It opened its first home-improvement store in 1946 and went public in 1961. In 2007, it opened its first stores outside the U.S., in Canada.
The company's stock rose dramatically in the early 1990s, in step with the growing interest in DIY home-improvement trend. Indeed, HGTV launched in December 1994. That year, Lowe's had net sales of $6.1 million. By 2019, that figure grew to $72.1 billion.
Lowe's Stock Fundamental Analysis
Lowe's Q3 earnings per share grew 40.4% to $1.98, though that missed Refinitiv estimates of $1.99, as revenue climbed 28% to $22.31 billion, with same-store sales shooting up 30.1%. But continued costs related to Covid will put pressure on profits. In its Q3 earnings report Lowe's said Covid-related costs to support hourly front-line workers totaled $245 million in Q3 and more than $1.1 billion year to date. That came a day after rival Home Depot (HD) also beat earnings views and announced a $1 billion increase in annual compensation costs for front-line workers.
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 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 (unchanged from our 2nd quarter 2020 earnings review of Lowe's). We therefore believe the stock of Lowe's is fully valued at its current stock price of $149.93
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 and therefore rate the stock of Lowe's as a hold.
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 and therefore rate the stock of Lowe's as a hold.
Next earnings release of Lowe's
It is expected that Lowe's will release their 4th quarter 2020 earnings report in late February 2020