Following Home Depot, Lowe's Q4 Comps Set To Beat Estimates

Wedbush analyst Seth Basham expects Lowe's Companies, Inc. LOW to deliver better-than-expected comps for the fourth quarter, driven by strong sector tailwinds that were visible in the Home Depot Inc HD print.

Expectations For Lowe's

Lowe’s is expected to announce its fourth-quarter results on March 1. The Street expects EPS of $0.79 on revenue of $15.38 billion. In the past four quarters, Lowe’s EPS has managed to top Street view only once. Of particular interest, the last two quarterly earnings were below expectations.

The sector benefited from a mild early winter in October/November. In addition, the home improvement retailers saw higher demand following the uncertainty associated with the presidential elections, and that consumers had continued to trade-up and respond to increased promotions.

“Although we believe that LOW is not performing as well as HD, sector strength demonstrated by HD should enable the company to nicely exceed our 2.2 percent and consensus 2.4 percent 4Q16 comp estimates when the company reports next Wednesday, March 1,” Basham wrote in a note.

Related Link: Large Supplier Checks Have Favorable Read Through For Home Depot, Lowe's

Review Of Home Depot

Home Depot delivered an outstanding fourth quarter, with comps of 5.8 percent (+6.3 percent in United States), handily topping consensus 3.7 percent, along with EPS of $1.44 versus consensus $1.33.

Home Depot guided 2017 comps to 4.6 percent, nicely above consensus 4.1 percent, but it guided EPS at $7.13, below consensus’ $7.16 due to conservatism, gross margin investments and likely lower share repurchases.

Basham has a Neutral rating on both firms, with a price target of $145 for Home Depot and of $77 for Lowe’s.

At last check, shares of Home Depot were up 0.52 percent to $143.75 after touching a new 52-week high of $145.65. Lowe’s were up 0.27 percent to $76.95.