Lowe's Q2 Earnings Preview: Analysts Stress 'Critical' Margin Performance As Investors Focus On Housing Market, Home Repair Trends

A second-quarter earnings report from Lowe's Companies LOW Tuesday before the market open could be closely watched by investors and analysts for clues on consumer spending on home repairs and the impact it could have on the housing sector.  

Lowe’s Earnings Estimates: Analysts expect Lowe's to report second-quarter revenue of $23.91 billion, according to data from Benzinga Pro.

The company reported revenue of $24.96 billion in last year's second quarter. Lowe's has beaten analyst revenue estimates in three of the last five quarters, including two straight quarters.

Analysts expect the company to report second-quarter earnings per share of $3.97, compared to $4.56 reported in last year's second quarter. Lowe's has beaten analyst estimates for earnings per share in more than 10 straight quarters.

Read Also: How To Earn $500 A Month From Lowe’s Stock Ahead Of Q2 Earnings Report

What Lowe’s Analysts Are Saying: The home improvement retailer could cut guidance, JPMorgan analyst Christopher Horvers said ahead of second-quarter results.

"In our view, LOW sentiment leans short against a long HD given investor views of relative guidance risk," Horvers said.

Horvers reiterated an Overweight rating and raised the price target from $268 to $270.

The analyst lowered second-quarter comparable sales to negative 4.5% due to weather-related concerns and a lag on do-it-yourself improvements.

"Like HD, a difficult start to the quarter on weather created a hole to dig out of but we also believe LOW's small/medium Pro exposure and share gains continue consistent with 1Q."  

Horvers sees a more positive second half of the year for Lowe's for gross margins and efficiency opportunities.

"LOW's margin performance is critical to the 2Q stock reaction and whether investors will view it as de-risked."

Here are other recent analyst ratings on Lowe's and their price targets:

• Tesley: Maintained Market Perform rating, $230 price target.
• Evercore ISI: Maintained In-Line rating, lowered priced target from $250 to $225.

Key Items To Watch: Lowe's second-quarter financial results come shortly after peer Home Depot HD reported quarterly results.

Home Depot reported quarterly sales growth of 0.6% year-over-year, which missed a Street consensus estimate. Customer transactions were down 1.8% year-over-year in the quarter, with comparable sales down 3.3% year-over-year.

Investors and analysts will be watching Lowe's report to see if the retailer also saw a sales decline, weaker same store sales and customer transactions and a smaller average ticket size, similar to Home Depot.

Data from Placer.ai shows that visits to Lowe's stores were up 0.6% year-over-year in the second quarter. For comparison, data showed that Home Depot visits were up 1.1% year-over-year in the second quarter.

Home Depot CEO Ted Decker said home improvement demand is strong, but higher interest rates and macro-economic uncertainty put pressure on consumer demand.

Comments from Lowe's could show the same, with the housing market seeing pressure and more consumers turning to home repair projects.

In the first quarter, Lowe's CEO Marvin Ellison said the company rolled out its new DIY loyalty program nationally, expanded same-day delivery options and took market share in key categories. An update on all three of these initiatives could help provide an outlook for the second half of the year for the home improvement retailer.

LOW Price Action: Lowe's stock trades at $242.76 versus a 52-week trading range of $181.85 to $262.49. Lowe's stock is up 9.1% year-to-date in 2024 and up 9.3% over the last year.

Home Depot shares are up 4.9% year-to-date in 2024 and up 12.1% over the last year.

Read Next:

• Home Depot Analysts Cut Their Forecasts Following Q2 Results

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