Lowe's Companies Q1 Earnings Disappoint, Shares Fall - Analyst Blog

Shares of Lowe's Companies Inc.LOW were trading down 4.5% in pre-market session after the company reported lower-than-expected first-quarter fiscal 2015 results. Management reiterated its fiscal 2015 guidance despite signals of a strong recovery in the housing market, sending investors into a tizzy.

Earnings of 70 cents per share and revenues of $14,129 million both fell below the Zacks Consensus Estimate of 74 cents and $14,227 million, respectively.

However, earnings and revenues increased 14.8% and 5.4%, respectively, from the year-ago quarter. This rise reflects that the improving housing market has boosted the retailer's performance, if not as strongly as analysts had hoped for.

Comparable-store sales (comps) increased 5.2% on a consolidated basis in the quarter while U.S. comps grew 5.3%.

In dollar terms, gross profit rose 5.3% year over year to $5,012 million, whereas gross profit margin remained almost unchanged mainly due to increase in cost of sales.

Other Financial Aspects

Lowe's ended the quarter with cash and cash equivalents of $1,434 million, long-term debt (excluding current maturities) of $10,334 million and shareholders' equity of $9,477 million. Cash generated from operating activities stood at $2,478 million, while capital expenditures were at 232 million.

During the quarter, the company repurchased $1 billion worth of its common stock and distributed $222 million.

Fiscal 2015 Outlook

Lowe's reiterated its fiscal 2015 guidance. The company expects sales growth of 4.5-5% and comps, on a consolidated basis, for the year are expected to grow in the range of 4-4.5%. Operating margin is expected to expand by nearly 80 bps to 100 bps.

Further, Lowe's expects earnings for fiscal 2015 to be $3.29 per share. Currently, the Zacks Consensus Estimate for the fiscal stands at $3.32 per share.

Moreover, the company intends to open 15-20 home improvement stores and hardware stores in the fiscal. As of May 1, 2015, the company operated 1,843 stores in the United States, Canada and Mexico.

Other Stocks to Consider

Currently, Lowe's carries a Zacks Rank #3 (Hold). Better-ranked stocks in the retail sector include Restoration Hardware Holdings, Inc. RH , Tecnoglass Inc. TGLS and Tempur Sealy International Inc. TPX . All these stocks carry 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 Nasdaq, Inc.

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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