Lowe’s (LOW)
Lowe’s Nails Down Q1 Profit; Provides Cautious Outlook
Lowe’s Nails Down Q1 Profit; Provides Cautious Outlook
The last two years have been tough for a wide range of industries. Consumer-driven industries have definitely had a hard time coping with declining sales across the board. With so much uncertainty about the economy and a rising unemployment rate, it was not surprising that consumers had to slash spending in order to deal with other urgent matters. Now that the economy is finally on the road to recovery, retailers are finally starting to see some light at the end of the tunnel. It was just reported last week that retail sales gained 0.4% in April, ahead of Wall Street’s expected 0.2% rise. Home-improvement retailer Lowe’s was one of the companies reaping the benefits of the improvement in sales. The company reported better-than-expected 2.7% increase in profit and same-store sales.
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Stock Analysis
Since the start of the downturn in the economy, Lowe’s has been battling a number of factors fighting against its success. The company’s core business focuses heavily on home-improvement and other building supplies. As the housing market started to crumble, so did sales at the company. People halted new constructions and planned home improvements as they watched the value of properties sink to record lows. The declining housing market, which has been deemed one of the catalysts for the recession, became one of the company’s worse enemies. While the company tried to deal with this, seasonal declines and rising job losses also pushed earnings further into negative territory. Improvements in these areas of the economy have started to propel the company’s earnings back in the right direction.
The company, based in Mooresville, N.C., said it earned $489 million, or 34 cents a share, in the three-month period ended April 30. In the same period last year the company earned $476 million, or 32 cents a share. Revenue jumped 4.7% to $12.39 billion as same-store sales rose 2.4%. The company in February had forecast 27 cents to 29 cents of earnings and same-store sales being flat to down 2%. Analysts had forecasted total revenue of $12.26 billion. Lowe’s said that government stimulus programs and favorable weather in March and April contributed to the increase in sales.
The outlook from the No. 2 U.S. home improvement chain was particularly surprising after it reported stronger-than-expected quarterly results. Lowe’s forecast second-quarter earnings of 57 cents to 59 cents a share. Analysts on average were expecting 62 cents. However, some analysts believe that Lowe’s outlook may be a little conservative. The company reported an increase in bigger-ticket items and some analysts think that increase will turn into more revenue during the quarter. Robert A. Niblock, Lowe’s chairman and CEO said, “While we are optimistic we will experience solid demand through the balance of the year, we view 2010 as a year of transition for our industry.”
Lowe’s may finally be on a stable recovery path. If the economy continues to improve, the company should not have a hard time exceeding its goals, especially since the summer months are a popular time for home improvements and construction. Lowe’s shares fell $1.12 during premarket trading.
Other Companies in the News
- GM Turns A Profit – General Motors said Monday it earned $865 million in the first quarter, its first profit since 2007.
- Man Group to Acquire GLG Partners – Man Group plc will buy GLG Partners (GLG: Charts, News, Offers) for $1.6 billion in cash and stock, creating a massive hedge fund with $63 billion in assets worldwide.
- Sirius Raises Earnings Forecast – Satellite radio provider Sirius XM Radio (SIRI: Charts, News, Offers) raised its full-year expectations for net subscriber additions by about 50 percent, helped by improving auto sales.
