Lowe's (LOW) Reports High Top and Bottom Line Growth

Home improvement retailer Lowe's (LOW) reported strong second quarter earnings that comfortably topped analyst estimates last week, indicating continued strength in the U.S. housing market and its related industries. The company, which primarily competes against Home Depot (HD), reported earnings of $0.88 per share, a 35% jump from the $0.65 it reported in the prior year quarter.

Revenue climbed 10% to $15.71 billion. Analysts on average had expected the company to earn $0.79 per share on revenue of $15.06 billion. Daily Chart
Lowe's same-store sales surged 9.6%, hitting its highest level in nine years and nearly matching Home Depot's 10.7% same-store sales growth last quarter. In the prior year quarter, Lowe's reported a 0.7% year-on-year decline in same-store sales. Looking forward, Lowe's raised its full-year earnings outlook to $2.10 per share, up from its prior forecast of $2.05. Sales are now expected to rise 5% with same-store sales growth of 4.5%, compared to its prior estimate of 4% sales growth and 3.5% same-store sales growth. Lowe's attributed its strong top and bottom line growth to robust demand for new home construction across America. However, the company has lagged behind Home Depot in most regards over the past three years. Yet CEO Robert A. Niblock remains upbeat regarding Lowe's results. "Home improvement demand was strong during the quarter, and we capitalized on it with improving execution," he stated. "We drove a healthy balance of ticket and transaction growth, and delivered solid performance across all product categories." Lowe's is currently the only bidder for Orchard Supply Hardware, Sears Holdings' (SHLD) failed spinoff that filed for Chapter 11 protection. Lowe's has offered $205 million plus the assumption of its outstanding debt to take over the hardware chain, which has a large presence in California. The acquisition, which is expected to close before the end of the month, will increase Lowe's presence on the West Coast substantially. Like Home Depot, Lowe's continued success is heavily dependent on the growth of the U.S. housing market. The U.S. Commerce Department recently announced that new constructions rose 6% in July from June to 896,000 new units. The National Association of Home Builders/Wells Fargo builder sentiment index also hit an eight-year high, indicating that the housing market should comfortably grow straight into next year. Shares of Lowe's currently trade at 17.9 times forward earnings with a 5-year PEG ratio of 12.5. The stock pays a quarterly dividend of $0.18 per share -- a 1.5% yield at current prices. Other News About LOW Lowe's Rides Housing Recovery to Higher Profit A continued housing recovery boost sales at Lowe's. Lowe's, Still In Fix-Up Project, Lifted By Housing Lowe's shows signs of life in its most recent quarter. Other Stocks in the News Apple Inc. Buys Embark What's Apple up to with its most recent acquisition? Hewlett-Packard Company Earnings Analysis Is there a silver lining to be found in HP's earnings? Copyright 2013 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Aug 27, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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