Buy Soaring Lowe's Stock at New Highs Ahead of Q2 Earnings?

Lowe’s LOW shares have soared over 130% since the market’s lows to crush Home Depot’s HD 80%, Amazon’s AMZN 70%, and Walmart’s WMT 20%. The company has benefitted from increased home improvement spending during the coronavirus stay-at-home environment. And now the stock faces its next big test, with its Q2 fiscal 2020 financial results due out before the opening bell on Wednesday, August 19.

Lowe’s popped over 2.5% to hit new highs Monday, as part of a larger market climb that saw the S&P 500 closed just below its February record, while the tech-heavy Nasdaq jumped to new heights.

The climb was driven by coronavirus standouts such as Tesla and Zoom. Meanwhile, Lowe’s rival Home Depot and Walmart were the Dow’s top performers ahead of their upcoming releases.

Monday’s strong start could signal that Wall Street is anticipating big things from the big names that report this week, in what has already been a better-than-projected quarterly earnings season.

 

 

 

 

 

 

 

 

 

 

 

 

 

Outlook

LOW stock has been a star during the climb off the market’s March lows, as investors dive into companies that are able to grow during the coronavirus. And Lowe’s certainly showcased its ability to expand during its first quarter, driven by increased home improvement and DIY spending.

Lowe’s Q1 comparable sales surged 12.3%, with revenue up 11% for the three-month period ended on May 1. On top of that, its digital channel sales soared 80% and its adjusted earnings jumped 45% to $1.77 a share. LOW’s beat our bottom line estimate by nearly 40% last quarter, which highlighted its strength during uncertain times.  

Looking ahead, our Zacks estimates call for LOW’s Q2 revenue to jump 17%, with its adjusted earnings expected to surge 36%. Plus, LOW’s earnings revisions have climbed higher in the last seven days, with its Q2 EPS estimate up 21% to $2.93 per share, and its FY20 figure up 9.4%. This means that analysts are even more optimistic about Lowe’s heading into its release.

Lowe’s is currently a Zacks Rank #3 (Hold) that boasts “A” grades for Growth and Momentum and a “B” for Value in our Style Scores system. LOW trades at a solid discount compared to its industry and its 1.43% dividend yield comes in not too far below the S&P 500’s average despite its outperformance—up 34% in 2020 against the S&P 500’s 5% climb.

Lowe’s is also part of a highly ranked Zacks industry and it appears worth considering for its ability to grow during the pandemic and beyond. That said, the stock could clearly face some near-term selling pressure no matter what happens Wednesday, given its climb.

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The Home Depot, Inc. (HD): Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
 
Walmart Inc. (WMT): Free Stock Analysis Report
 
Lowes Companies, Inc. (LOW): Free Stock Analysis Report
 
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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 Nasdaq, Inc.

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