Lowe's Q3 Earnings Beat, Comps Decline, FY24 Outlook Revised

Lowe’s Companies, Inc. LOW came up with third-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zack Consensus Estimate. However, the Mooresville, NC-based company faced year-over-year declines in both metrics and extended its streak of soft comparable sales performance.

The drop in big-ticket discretionary spending among Do-It-Yourself (DIY) customers hurt the company’s performance. However, this was partly mitigated by storm-related sales and growth in Pro and online comparable sales. The company also witnessed increased demand for smaller-ticket outdoor DIY projects.

Considering its third-quarter performance and the expectation of modest storm-related demand in the final quarter, Lowe’s has revised its full-year 2024 operating outlook.

LOW’s Quarterly Performance: Key Metrics and Insights

The home improvement retailer posted adjusted quarterly earnings of $2.89 per share, which came ahead of the Zacks Consensus Estimate of $2.82. However, the figure marked a decline from earnings of $3.06 per share reported in the same period last year.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Net sales of $20,170 million surpassed the Zacks Consensus Estimate of $19,955 million but declined 1.5% year over year. Comparable sales for the quarter fell 1.1%, showing an improvement from the 5.1% decline recorded in the second quarter. While muted demand from DIY customers weighed on comparable sales, the company achieved high-single-digit growth in Pro comparable sales. This performance outpaced our estimate of a 3.1% decline in comparable sales.

The gross profit declined 1.4% year over year to $6,796 million, while the gross margin remained flat at 33.7%. We had expected a gross margin expansion of 20 basis points.

The operating income decreased 5.9% to $2,536 million, while the operating margin shrunk 60 basis points to 12.6%. We had envisioned a 70-basis point contraction in the operating margin.

LOW’s Financial Health Snapshot

This Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $3,271 million, long-term debt (excluding current maturities) of $32,906 million and shareholders’ deficit of $13,419 million.

For the nine months ended Nov. 1, 2024, Lowe’s generated cash flow from operations of $8,714 million. During the quarter, the company executed a buyback of around 2.9 million shares, amounting to $758 million.

A Sneak Peek Into LOW’s FY24 Outlook

Lowe’s now anticipates fiscal 2024 total sales in the range of $83 billion-$83.5 billion, up from the prior estimate of $82.7 billion to $83.2 billion. Comparable sales are expected to decline by 3% to 3.5%, an improvement from the prior forecast of a 3.5%-4% drop.

The adjusted operating margin is projected between 12.3% and 12.4%, slightly down from the previous estimate of 12.4% to 12.5%. 

The forecast for adjusted earnings per share has been revised to a range of $11.80-$11.90, up slightly from the prior projection of $11.70 to $11.90. Management maintained its capital expenditure plan of approximately $2 billion for fiscal 2024.

Lowe’s Stock Price Performance

Shares of Lowe’s have risen 18.6% in the past six months compared with the industry’s growth of 20.3%.

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