Early Wednesday, Lowes (LOW) reported its fiscal fourth-quarter earnings – which left much to be desired. The company missed revenue estimates and took a step back in profit. And to make matters worse, the company expects 2023 to be a step backward.
While Wall Street was expecting revenue of $22.69 billion, Lowes came up just short at $22.45 billion. While this revenue figure was technically a slight improvement from the same period last year ($21.34 billion), there was an extra week this year. Without that extra week, Lowes would have seen a decline in revenue in comparing the two periods.
Profit declined as well, as Lowes reported a net income for the quarter of just $957 million compared to the previous year’s profit figure of $1.12 billion. The one figure in which Lowes did exceed expectations was EPS – reporting $2.28 adjusted vs the expected $2.21.
This lackluster quarter can be attributed to a shift in the economy. At the start of 2022, Lowes was the beneficiary of a thriving economy and a booming housing market. As a result, retail customers flocked to stores as they upgraded their homes and took on new projects.
And looking even further back to Lowes’s past success, it’s clear that they benefited from the COVID-19 pandemic – as lockdowns gave homeowners nothing better to do than improve their homes.
However, the pandemic is a thing of the past in 2023 as life returns to normal. Moreover, the housing market has cooled off and consumer spending is slowing as concerns of a recession loom large. As such, Lowes is remaining conservative in their outlook this year. They are projecting total sales between $88 billion and $90 billion while analysts expected $90.48 billion.
With that said, some experts suggest that the housing shortage here in the US – paired with sky-high interest rates – could end up helping Lowes and the home improvement segment as a whole.
So – what should investors do with a company like Lowes? If you currently own shares, is it time to offload them? We’ve analyzed this stock through the VectorVest stock forecasting software and have three key insights for you below.
Despite All This, LOW Still Has Fair Upside Potential & Timing With Very Good Safety
The VectorVest system simplifies trading by telling you everything you need to know in just three ratings: relative value (RV), relative safety (RS), and relative timing (RT). These ratings sit on an easy-to-understand scale of 0.00-2.00, with 1.00 being the average.
And to make the process even easier, VectorVest gives you a clear buy, sell, or hold recommendation based on these ratings - for any given stock, at any given time. That includes LOW. Here’s the current situation:
- Fair Upside Potential: The RV rating assesses the long-term price appreciation potential for a stock (three years out) compared to AAA corporate bond rates and risk. And as of now, the stock still has a fair RV rating of 0.95 - albeit below the average.
- Ver Good Safety: In terms of risk, LOW has very good safety - with an RS rating of 1.26. This is calculated based on the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Fair Timing: Looking at the price trend for LOW, it’s clearly moving in the wrong direction - especially after today’s trading session. With that said, the RT rating is still fair - just below the average at 0.91. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating for LOW is just above the average at 1.05 - which is fair. But that begs the question - is this stock worth buying? Is it time to sell? Or, should you hold on and await a stronger price trend to form - one way or the other?
You don’t have to play the guessing game or let emotion influence your decision-making. Get a clear answer on your next move with our free stock analyzer today.
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VectorVest advocates buying safe, undervalued stocks, rising in price. Right now, LOW has fair upside potential and timing ratings that are just below the average. But it still has very good safety.
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