Lowe’s Raises Guidance on Robust Q2 Results; Shares Jump 10%

American home improvement retailer Lowe’s Companies, Inc. (LOW) delivered impressive second-quarter results, with both revenue and earnings beating expectations aided by continued demand for its products and services. Shares jumped 9.6% on the news to close at $199.73 on August 18.

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The company reported earnings of $4.25 per share, up 13% year-over-year, and meaningfully outpaced the Street’s estimate of $3.97 per share.

Additionally, total sales for the quarter stood at $27.57 billion, increasing a modest 1.1% from the year-ago period and beating analysts’ estimates of $26.73 billion. (See Lowe’s stock charts on TipRanks)

On the negative side, total comparable sales for the reported period decreased 1.6% year-over-year, with U.S. comparable sales making a decline of 2.2%. Notably, at the quarter-end, Lowe’s had 1,973 home improvement and hardware stores operating in the U.S. and Canada, and it serviced 230 dealer-owned stores.

Marvin R. Ellison, the company’s chairman, president, and CEO said, “Our strong results this quarter demonstrate that our Total Home strategy is working, with U.S. sales comps up 32% on a two-year basis…Looking forward, I am confident in the positive outlook for our industry, and our ability to drive operating margin expansion and market share gains.”

During the quarter, Lowe’s paid $430 million in dividends and repurchased $3.1 billion worth of its common stock.

Based on the current strong sales trends, the company raised its full-year Fiscal 2021 guidance for revenue to $92 billion, while the consensus estimate is pegged at $91.5 billion. Moreover, the company also announced a share buyback program of a minimum of $9 billion for the full year.

In response to Lowe’s impressive results, Wells Fargo analyst Zachary Fadem assigned a Buy rating to the stock and lifted the price target to $230 (15.2% upside potential) from $225.

Fadem noted that the company reported better-than-feared sales numbers, with margin expansions despite a decline in its comparable sales.

What’s more, the analyst believes that the company’s second-half outlook looks fairly beatable and states that the FY22 catalysts strengthen the company’s future performance.

Fadem added, “We see upside from initiatives to drive Pro, merchandising, and profit improvements. Macro remains supportive, self-help levers remain intact, and we see a long runway to take share in a fragmented industry.”

Overall, the stock commands a Strong Buy consensus rating based on 12 Buys and 4 Holds. The average Lowe’s price target of $226.69 implies 13.5% upside potential to current levels. Shares have gained 26.2% over the past year.

Also, TipRanks data shows that financial blogger opinions are 97% Bullish on LOW, compared to a sector average of 72%.