Lowe's (LOW) Down 10.7% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Lowe's (LOW). Shares have lost about 10.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Lowe's due for a breakout? Well, first let's take a quick look at its most recent earnings report in order to get a better handle on the recent catalysts for Lowe's Companies, Inc. before we dive into how investors and analysts have reacted as of late.
Lowe’s Q2 Earnings Beat Estimates, FY’26 Outlook Moves Lower
Lowe’s reported second-quarter fiscal 2026 adjusted earnings of $4.40 per share, up 1.6% year over year, surpassing the Zacks Consensus Estimate of $4.22. Revenues rose 8.3% to $25,956 million but missed the consensus estimate of $26,135 million.
Results were supported by strength in Pro and home services, and a 15.7% increase in online sales, while persistent DIY macro pressure tempered demand. The quarter included a benefit of 11 cents per share from tariff refunds. Lowe’s also lowered its fiscal 2026 outlook, bringing its sales, comparable-sales, margin and earnings expectations down to the lower end of its previously issued ranges to reflect first-half performance and current demand trends.
LOW’s Earnings Get Help From Tariff Refunds
Reported earnings were $4.27 per share, unchanged from the year-ago quarter. Lowe’s recognized $96 million in pre-tax expenses tied to intangible asset amortization from the Artisan Design Group and Foundation Building Materials acquisitions.
The non-GAAP reconciliation added back a net 13 cents per share related to those acquisition expenses. In the prior-year quarter, acquisition-related items reduced earnings by a net 6 cents per share. Pre-tax earnings increased to $3.18 billion from $3.16 billion, while net interest expense rose to $374 million from $313 million.
Lowe’s Sales Mix Shows Pro & Home Services Strength
Comparable sales increased 0.2% year over year and marked the fifth consecutive quarter of positive comps. Pro and home services were key contributors, while discretionary DIY spending remained pressured by the macro environment. Management highlighted continued execution of the company’s Total Home strategy.
The online business remained another source of momentum during the quarter. Management said sustained growth across Pro, online and home services supported positive comparable sales. As of July 31, 2026, Lowe’s operated 1,761 stores representing 196.0 million square feet of retail selling space.
LOW’s Gross & Operating Margins Contract
Gross profit increased 5.9% year over year to $8.58 billion from $8.10 billion. Gross margin fell 80 basis points year over year to 33%.
Selling, general and administrative expenses increased 6.7% to $4.46 billion, although SG&A as a percentage of sales improved to 17.2% from 17.4%.
Depreciation and amortization rose to $572 million from $457 million. Operating income advanced 2.3% to $3.55 billion, but operating margin narrowed to 13.7% from 14.5%.
Lowe’s Balance Sheet and Cash Flow
Cash and cash equivalents stood at $3.17 billion at quarter-end compared with $4.86 billion a year earlier. Merchandise inventory increased to $17.7 billion from $16.3 billion, while long-term debt, excluding current maturities, rose to $35.2 billion from $30.6 billion. Total assets were $55.9 billion.
For the first six months of fiscal 2026, net cash provided by operating activities was $7.01 billion compared with $7.61 billion in the prior-year period. Capital expenditures were $1.06 billion. Cash dividend payments totaled $1.35 billion, and common-stock repurchases were $366 million. Net cash used in financing activities reached $4.06 billion.
LOW Narrows Fiscal 2026 Outlook to Lower End
Lowe’s expects fiscal 2026 total sales of $92 billion compared with its prior range of $92-$94 billion. Comparable sales are projected to be flat, versus the previous expectation of flat to up 2%. The revision reflects first-half operating results and current demand trends.
The company projects an operating margin of 11.2%, versus the earlier 11.2-11.4% range and an adjusted operating margin of 11.6%, compared with 11.6-11.8% previously. Earnings are expected to be about $11.75 per share, compared with the prior expected range of $11.75 to $12.25 per share. Adjusted earnings are forecast at about $12.25 per share compared with the prior expected range of $12.25 to $12.75 per share. Capital expenditures remain targeted at up to $2.50 billion.
The outlook includes tariff refunds recognized in the second quarter but excludes potential additional tariff refunds in the second half. Lowe’s also expects net interest expense of about $1.60 billion and an effective tax rate of roughly 24.5%. Adjusted guidance excludes an expected 40-basis-point operating-margin impact and an after-tax impact of 50 cents per share from acquisition-related intangible asset amortization.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -7.5% due to these changes.
VGM Scores
At this time, Lowe's has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Lowe's has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Lowe's is part of the Zacks Retail - Home Furnishings industry. Over the past month, Somnigroup International (SGI), a stock from the same industry, has gained 1.2%. The company reported its results for the quarter ended June 2026 more than a month ago.
Somnigroup International reported revenues of $1.82 billion in the last reported quarter, representing a year-over-year change of -3%. EPS of $0.58 for the same period compares with $0.53 a year ago.
For the current quarter, Somnigroup International is expected to post earnings of $1.06 per share, indicating a change of +11.6% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.6% over the last 30 days.
Somnigroup International has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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This article originally published on Zacks Investment Research (zacks.com).
