Stock of the Day
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Lowe's (LOW)
Lowe's Earnings Continue to Struggle
The housing market may be improving, but home-improvement retailers are still not out of the woods yet. Lowe's reported on Monday that its second-quarter profits fell by 19.1 percent as consumers continued to delay house projects, while uncertainty remains in the fragile market. The company has seen its share of ups and downs this year, but this recession has kept earnings mostly negative. Why is the retailer still having a hard time beating Wall Street's expectations? Can the company withstand another quarter of lagging numbers?
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| Stock Analysis |
As the housing market showed signs of hope in July, investors were optimistic that the positive momentum would spill over into retail sales at home-improvement retailers. Unfortunately, that has not been the case. Cautious consumers are just not ready to take on discretionary projects while economic data remains mixed and the job market continues to struggle. In the second quarter, sales declined 4.6 percent to $13.8 billion, while for the six months ended July 31, sales declined 3.2 percent to $25.7 billion. These numbers were a disappointment because this is typically one of the strongest quarters for the retailer as consumers take on small projects and build new homes. The poor results have some analysts questioning if the housing market slump has truly bottomed out? This news could be a sign that the recovery has stalled. If that is the case, then Lowe's can expect similar results in the near future.
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Onlookers probably thought that the No.2 home-improvement retailer was doing pretty well. Over the last few months, the company has been expanding operations and opening new stores all across the United States. In actuality, this was Lowe's strategy to improve dwindling sales. Despite these new stores, the company still was not able to meet expectations. As a result, the Mooresville, North Carolina based company has decided to scale back its expansion strategy to deal with the challenging market. Looking ahead to the third quarter, Lowe's expects earnings per share of $0.21-$0.25, whereas analysts look for $0.23-$0.30 per share, with a consensus of $0.24. Lowe's really needs the turnaround in the housing market to translate into sales for the company. The company really can't withstand that many more disappointing quarters. Its main competitor Home Depot (HD: Charts, News, Offers) is scheduled to deliver second-quarter earnings on Tuesday.
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Lowe's Commentary:
Why These Stocks Are a House of Cards - This week should bring more signs that housing is improving. It also might be a good time to unload home-improvement stocks, such as Lowe's.
Housing Recovery? Not at Lowe's - That much-ballyhooed housing market recovery? Curiously, it apparently isn't yet being felt at home improvement retailers.
Earnings Bring Housing Sector Into Focus – Is the housing recovery stalling? Judging by Lowe's latest results, this may be the case.
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RIM (RIMM) Outpaces Rivals to Lead Fortune Fastest-Growing List
CIT (CIT) Completes Tender Offer
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Profile |
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