Lowe's Q2 Earnings Surge as Home Improvement Spending Rise - Analyst Blog


Driven by rise in home improvement spending owing to the strengthening job and income scenario, Lowe's Companies Inc . ( LOW ) posted strong results for the second quarter of fiscal 2014 wherein it's top and bottom line both surpassed the Zacks Consensus Estimate.

The company's earnings of $1.04 per share in the quarter were approximately 18.2% higher than the year-ago comparable quarter adjusted earnings figure of 88 cents. Moreover, the company's earnings for the reported quarter were a couple of cents ahead of the Zacks Consensus Estimate.

The stock witnessed a 5.7% rise in total revenue to $16,599 million due to strong performance during the peak selling season. Moreover, total revenue came ahead of the Zacks Consensus Estimate of $16,529 million. Additionally, comparable-store sales increased 4.4% on a consolidated basis in the quarter.

In dollar terms, gross profit rose 6.3% year over year to $5,735 million. Moreover, gross profit margin improved 20 basis points to 34.55% mainly due to lower cost of sales as a percentage of net sales.

Other Financial Aspects

Lowe's ended the quarter with cash and cash equivalents of $1,039 million, long-term debt (excluding current maturities) of $10,063 million and shareholders' equity of $11,240 million, reflecting a debt-to-capitalization ratio of approximately 47.2%.

During the quarter, the company repurchased $1.1 billion worth of its common stock and distributed $183 million as dividends, while in the first half of fiscal 2014, it repurchased $2 billion worth of its common stock and distributed $369 million as dividends.

Update on Fiscal 2014 Outlook

Despite reporting strong quarterly results, Lowe's lowered its fiscal 2014 sales outlook while reaffirming its earnings guidance. The company now expects its sales and comparable-store sales to register year-over-year growth of approximately 4.5% and 3.5%, respectively. Earlier, the company has projected growth of 5% and 4% in sales and comparable-store sales, respectively.

Operating margin is still expected to improve by nearly 65 basis points while effective tax rate is projected to be almost 37.2%

Further, Lowe's continues to anticipate earnings for fiscal 2014 to be approximately $2.63 per share. Currently, the Zacks Consensus Estimate for the fiscal stands at $2.60 per share.

Moreover, the company still intends to open 10 home improvement stores and 5 hardware stores in the fiscal. As of Aug 1, 2014, the company operated 1,837 stores in the United States, Canada and Mexico.

Other Stocks to Consider

Currently, Lowe's carries a Zacks Rank #4 (Sell). However, some better-performing stocks in the retail industry space include Skechers USA Inc. ( SKX ), Deckers Outdoor Corp. ( DECK ) and Iconix Brand Group, Inc. ( ICON ). While Skechers sports a Zacks Rank #1 (Strong Buy), Deckers and Iconix Brand hold a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: LOW , SKX , DECK , ICON



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