Goldman Sachs: Lowe's Margin Drivers Gain Visibility

Lowe's LOW 3Q results support Goldman Sachs' thesis that margin drivers are gaining visibility, driving accelerating EPS growth through year-end amidst a soft top-line, bridging the gap to a sales turn as the macro stabilizes in 2011. Goldman is raising its 2010 forecast by $0.01 to $1.42 to reflect the 3Q beat, while maintaining 4Q2010 at $0.18. 2011 and 2012 stay at $1.64 and $1.90, respectively. Given two straight top-line misses its sales is modeled toward the low-end (+0.5%). Goldman's 12-month target of $26 is based on P/E, DCF and normalized earnings. Key risks include better margin on the upside. Downside risks include a tough housing market. LOW closed Monday at $21.46