Driven by resurgence in the U.S. housing market,
Lowe's Companies Inc
) posted strong results for the second quarter of fiscal 2013,
with earnings rising 37.5% year over year to 88 cents per share.
Moreover, quarterly earnings surpassed the Zacks Consensus
Estimate of 80 cents per share.
This Zacks Rank #3 (Hold) stock witnessed a 10.3% rise in
total revenue to $15,711 million and handily beat the Zacks
Consensus Estimate of $15,049 million. During the quarter,
comparable-store sales registered a 9.6% rise on a consolidated
The year-over-year top-line growth was primarily driven by the
company's better capitalization of the rebounding domestic
housing market. During the quarter, Lowe's witnessed solid
performances across all product categories.
In dollar terms, gross profit rose 11.6% year over year to
$5,397 million. Consequently, gross profit margin improved 42
basis points (bps) to 34.35% during the quarter, reflecting a
decline in cost of sales as a percentage of revenues.
Other Financial Aspects
Lowe's ended the quarter with cash and cash equivalents of
$1,085 million, long-term debt (excluding current maturities) of
$9,015 million, and shareholders' equity of $13,062 million,
reflecting a debt-to-capitalization ratio of 40.8%.
During the quarter, the company repurchased $1.0 billion worth
of its common stock and distributed $174 million in
Fiscal 2013 Outlook
Buoyed by better-than-expected quarterly results, the company
raised its outlook for fiscal 2013. Lowe's now expects sales to
rise by nearly 5% and comparable store sales by about 4.5%.
Earlier, Lowe's had anticipated sales and comparable store sales
to increase 4% and 3.5%, respectively. Further, management raised
its earnings expectation for fiscal 2013 to $2.10 per share from
$2.05 forecasted earlier.
The company also raised its growth projection for earnings
before interest and taxes (EBIT) as a percentage of sales or
operating margins to 65 bps year over year in fiscal 2013
compared with 60 bps projected previously.
Moreover, the company reaffirmed its plan to open 10 new
stores during fiscal 2013. As of Aug 2, 2013, the company
operated 1,758 locations in the United States, Canada and
Recently, Lowe's announced that it has got the approval from
the U.S. Bankruptcy Court to acquire most of Orchard Supply
Hardware Stores Corporation's assets. The acquisition will be a
crucial move for the company as increasing square footage in the
key California market will bring greater opportunities to improve
its top line and profitability.
Lowe's operates through 110 stores in California. However, its
presence is significantly lesser than that of its competitor,
The Home Depot, Inc.
) and this could be the reason behind its lagging in performance.
Orchard has 91 neighborhood hardware and garden stores, out of
which Lowe's will acquire 72 stores.
Other Stocks to Consider
Better performing stocks in the building product retail
industry space include
Lumber Liquidators Holdings, Inc.
), with a Zacks Rank #1 (Strong Buy) and
Builders FirstSource, Inc.
), with a Zacks Rank #2 (Buy).
BUILDERS FIRSTS (BLDR): Free Stock Analysis
HOME DEPOT (HD): Free Stock Analysis Report
LUMBER LIQUIDAT (LL): Free Stock Analysis
LOWES COS (LOW): Free Stock Analysis Report
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