LOW’s Margin Outlook Aggressive But Achievable

Analysts at Goldman Sachs maintain their "neutral" rating on Lowe's Companies Inc LOW. The target price for LOW is set to $24. According to Goldman Sachs, “LOW’s ability to deliver sales only slightly below the guided range – and in line with our forecast; to achieve our margin projection; and, to hold guidance, speaks to two important dynamics: (1) the environment for housing-related retail is not quite as bad as initially feared, and (2) LOW has recovered from inventory and margin missteps in 1Q2010 and is executing to plan. With these premises in mind, the firm’s 2010 outlook looks believable, particularly toward the lower-end, and particularly once share buybacks, not incorporated into guidance, are considered. The outlook admittedly calls for far better EBIT margin trends than the firm produced in the first half of the year, but a combination of easier compares in asset writedowns and bonus accruals, benefits from price optimization, and a fading drag from mix suggest that improvement is achievable.” “Our projections suggest accelerating earnings growth through the year, a rarity for a hardlines retailer given tougher 2H compares across most of the space. The market’s response today suggests ongoing skepticism about the firm’s outlook, which could yield opportunity,” the analysts add. More Analyst Ratings here