Lowe's Companies To Face Near-term Pressure Amid Soft Housing Market Trends: Analyst

Telsey Advisory Group analyst Joseph Feldman reiterated the Market Perform rating on Lowe's Companies, Inc. LOW, lowering the price target to $225 from $230.

Given the tough macro climate for the industry, the analyst reduced 3Q23 and annual estimates on the company, which may weigh on the near-term prospects.

Feldman notes that the company's business will likely remain under pressure from the soft housing market trends.

Further, demand pressures have continued to intensify and more than anticipated since the 2Q23 earnings call on August 22, indicating that sales in 3Q23 should come in below the company's stated guidance. 

In addition, the resumption of student loan payments this month is anticipated to pose a negative headwind on the business, albeit the precise impact is uncertain and is expected to be less than with most other industries and companies, the analyst adds.

For 3Q23, the analyst reduced the EPS estimate to $3.08 from $3.14. For 2023, Feldman's EPS estimate is now $13.38 vs. $13.49 previously. 

Shrink has been a significant concern across retail this year, but Lowe's has done a solid job managing it this year—the company expects the financial impact of shrink in 2023 to be roughly flat with last year at about 100 bps and vs. mid-60 bps back in 2019.

In addition, Lowe's has benefited from having a more rural store footprint, which creates less exposure to recently elevated theft and organized crime in more urban areas, the analyst adds.

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Price Action: LOW shares are trading lower by 0.23% to $199.70 on the last check Wednesday.