We have maintained our long-term Neutral recommendation on
Lowe's Companies Inc
), with a target price of $40.00, following the company's
fourth-quarter 2012 results.
Why the Reiteration?
Being the world's second largest home improvement retailer,
Lowe's boasts a proven strategy of investing in stores to enhance
customer-shopping experience by improving point-of-sale and
directional signage, and enhancing its array of products. The
company's sustained focus on Everyday Low Prices, New Lower
Price, Go Local and Specialty Sales initiatives, have helped it
boost its market share.
The company posted fourth-quarter fiscal 2012 earnings of 26
cents per share that handily surpassed the Zacks Consensus
Estimate of 23 cents. However, earnings remained flat year over
Total revenue of this Zacks Rank #3 (Hold) stock declined 5%
year over year to $11,046 million but came ahead of the Zacks
Consensus Estimate of $10,826 million.
Going forward, the company now expects earnings to be $2.05
per share in fiscal 2013, while total sales are projected to rise
by 4% with comparable-store sales increasing by 3.5%. The current
Zacks Consensus Estimate for fiscal 2013 is $2.09.
Moreover, the company's efficient merchandising strategy and
increased demand on account of remodeling activities following
Hurricane Sandy will facilitate it to improve operating margins
by 60 basis points in fiscal 2013.
However, we prefer to remain on the sidelines as we believe
that spending on big remodeling projects will likely remain under
pressure until the housing market stabilizes, inventory levels
normalize and consumer-spending rebounds.
Other Stocks to Consider
However, until any further upward revision in the Zacks Rank
on Lowe's, other stocks worth considering in the housing and
allied sectors include
Lumber Liquidators Holdings, Inc
Travis Perkins plc
), both of which hold a Zacks Rank #1 (Strong Buy) and are
expected to continue with the upbeat performance.
) carrying a Zacks Rank #2 (Buy) is also worth considering.
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