Lowe's Pro Sales Lead The Way As DIY Slows, Analysts Say

The company reported its results amid an exciting earnings season. Here are some key analyst takeaways.

Goldman Sachs On Lowe’s Companies

Analyst Kate McShane maintained a Buy rating, while raising the price target from $260 to $276.

Although Lowe's reported better-than-expected results for the third quarter, comparable sales contracted by 1.1%, McShane said in a note. While sales continued to be pressured by weaker DIY trends with consumers dealing with elevated interest rates, some of the headwinds were offset by "a stronger Pro business, online sales, and smaller-ticket outdoor DIY projects," she added.

Operating margin contracted by 86 basis points year-on year to 12.3%, coming in lower than consensus of 12.5%, "with the incremental storm impact having ~15bps negative impact," the analyst stated. "For 4Q, the company noted that excluding storm related impacts, operating margin will roughly be in line with prior year outlook reflecting benefits from ongoing PPI initiatives and incremental direct costs and lower gross margin profile," she further wrote.

Truist Securities On Lowe’s Companies

Analyst Scot Ciccarelli reiterated a Buy rating, while lifting the price target from $307 to $310.

Storm-related activity boosted comps by around 100 basis points, "but was a drag on margins," Ciccarelli said. Even excluding the storms, sales were "modestly better than mgmt and investor expectations coming out of 2Q," he added.

Transactions declined by 1.3%, partially offset by an increase in average ticket size, the analyst stated. "Finally, Pro sales posted an impressive +HSD comp, offset by continued softness in bigger-ticket DIY discretionary demand," the analyst further wrote.

Check out other analyst stock ratings.

DA Davidson On Lowe’s Companies

Analyst Michael Baker reiterated Buy rating, while reducing the price target to $240.

Comps were down 1.1% in the third quarter, but beat consensus of a decline of 2.8% and represented an acceleration from the 5.1% decline in the previous quarter, Baker said. "Even excluding hurricane related sales, LOW would have beaten on the strength of a high-single digit positive comp in Pro, which is an acceleration from a mid-single digits increase last quarter," he added.

Relative to the industry data, Lowe's sales came in 300 basis points light, similar to the previous quarter's gap of 340 basis points, the analyst stated. Gross margins came in flat at 33.7%, short of consensus by 10 basis points, he added.

BofA Securities On Lowe’s Companies

Analyst Robert Ohmes maintained a Buy rating and price target of $305.

Lowe’s reported adjusted earnings of $2.89 per share, "ahead of our $2.82 estimate driven by higher-than-expected comp sales," Ohmes said in a note. The decline in comps reflected "continued softness in DIY bigger-ticket discretionary demand projects, partially offset by storm-related sales positive comp sales in Pro & online, and strength in smaller ticket outdoor DIY projects," he added.

Progress in Lowe's Total Home strategy will likely enable the company to "deliver on its commitment to grow its Pro business at 2x the market," the analyst stated. "We also expect DIY-focused strategic investments to support growth once the macro improves," he further wrote.

JPMorgan On Lowe’s Companies

Analyst Christopher Horvers reaffirmed an Overweight rating and price target of $300.

Lowe’s raised its guidance for 2024 to a decline in comps of 3%-3.5%, from its previous projection of 3.5%-4%, Horvers said. Management raised their projection for earnings to $11.80-11.90 per share, from the prior estimate of $11.70-11.90 per share, he added.

"We continue to see a small project DIY recovery emerging," the analyst wrote. Management remained conservative on the fourth-quarter outlook, "assuming a smaller lift from the storms" and continued to project flat gross margins, "with benefits from vendor clawbacks continuing to build/accelerate into 4Q," he further stated.

LOW Price Action: Shares of Lowe’s Companies were up 0.5% to $264.29 at the time of publication Thursday.

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