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Lowe's (LOW) Q2 Earnings Beat Estimates, Sales Decline Y/Y

·4-min read

Lowe’s Companies, Inc. LOW delivered mixed second-quarter fiscal 2022 results, with the top line lagging the Zacks Consensus Estimate and the bottom line beating the same. Also, earnings improved from the previous fiscal year’s quarterly reading on a higher operating margin. LOW delivered the 13th straight earnings beat in the reported fiscal quarter.

This presently Zacks Rank #3 (Hold) player’s shares have gained 17.4% in the past three months compared with the industry’s growth of 15.3%.

Quarter in Detail

Earnings per share (EPS) of $4.67 surpassed the Zacks Consensus Estimate of $4.63 and rose 9.9% from the EPS of $4.25 recorded in the second quarter of fiscal 2021.

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Zacks Investment Research


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Net sales of $27,476 million fell 0.3% year over year and came below the Zacks Consensus Estimate of $28,195 million. Comparable sales dipped 0.3% in the quarter under review. Comparable sales for the U.S. home-improvement business rose 0.2% in the reported quarter. Pro-customer sales jumped 13%, recording the ninth consecutive quarter of a double-digit increase.

Gross profit dipped 1.9% year over year to $9,133 million, while gross margin contracted 54 basis points (bps) to 33.24%. Operating income amounted to $4,229 million, up 0.5% year over year. Operating margin expanded 12 bps to 15.39% on gains from the Total Home strategy and the execution of the Perpetual Productivity Improvement initiative.

Other Financial Aspects & Developments

LOW ended the quarter with cash and cash equivalents of $1,482 million, long-term debt (excluding current maturities) of $28,763 million and a shareholders’ deficit of $8,442 million.

Lowe’s generated cash flow from operations of $6,012 million for the six months ended Jul 29, 2022. Capital expenditures amounted to $687 million. For fiscal 2022, LOW expects capital expenditures of nearly $2 billion.

In the reported quarter, Lowe’s bought back 21.6 million shares for $4 billion and paid out dividends of $524 million. LOW expects to repurchase nearly $12 billion of shares in fiscal 2022.
    
As of Jul 29, 2022, Lowe’s operated 1,969 home-improvement and hardware stores across the United States and Canada. LOW serviced nearly 212 dealer-owned stores.

Outlook

Management reiterated guidance for fiscal 2022. LOW expects revenues of $97-99 billion (including the 53rd week). The 53rd week is likely to increase sales by $1-$1.5 billion. In fiscal 2021, Lowe’s revenues amounted to $96.3 billion.

Comparable sales in fiscal 2022 are envisioned in the range of a decline of 1% to a rise of 1%. Lowe’s continues to expect the gross margin rate to improve slightly from the year-ago fiscal year’s level. The operating margin is expected to be 12.8-13%. Management anticipates earnings per share of $13.10-$13.60 for the current fiscal year.

Management now anticipates comparable sales to match the lower end of its guided range, and the operating income and EPS to meet the upper end of the respective projected ranges. Lowe’s expects continued strength in its Pro business and improving DIY trends.

3 Top Retail Stocks for You

We highlighted three better-ranked stocks in the Retail - Wholesale sector, namely Tecnoglass TGLS, Ulta Beauty ULTA and CVS Health CVS.

Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 28.2% and 47.7%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 24.4%, on average.

Ulta Beauty, a leading beauty retailer in the United States, currently has a Zacks Rank #2 (Buy). ULTA has a trailing four-quarter earnings surprise of 49.8%, on average.

The Zacks Consensus Estimate for Ulta Beauty’s current financial-year sales suggests growth of 10.4% from the corresponding year-ago reported figure. ULTA has an expected EPS growth rate of 10.7% for three-five years.

CVS Health, a pharmacy innovation company with integrated offerings across the entire spectrum of pharmacy care, currently has a Zacks Rank of 2. CVS has a trailing four-quarter earnings surprise of 6.7%, on average.

The Zacks Consensus Estimate for CVS Health’s current financial-year sales and earnings per share suggests growth of 6.6% and 1.1%, respectively, from the corresponding year-ago reported numbers. CVS has an expected EPS growth rate of 7.7% for three-five years.


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