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On Wednesday, Bernstein analysts, led by Zhihan Ma, adjusted the price target for Lowe’s Companies Inc. (NYSE:LOW) shares, increasing it marginally from $293.00 to $294.00. The firm maintained its Outperform rating on the home improvement retailer’s stock, which currently commands a market cap of $140 billion. According to InvestingPro data, analysts’ targets for Lowe’s range from $216 to $316, with 10 analysts recently revising their earnings expectations upward. The update comes as the market anticipates the release of fourth-quarter earnings for the home improvement sector next week, with Lowe’s scheduled to report on February 26.
The Bernstein team projects a negative comparable sales growth of -2% for both Home Depot (NYSE:HD) and Lowe’s in the fourth quarter of 2024. However, they anticipate a turnaround in the fiscal year 2025, with an expected positive comparable sales growth of +1%. The preference for Lowe’s over Home Depot is based on the perceived lower execution risk in Lowe’s strategy, which focuses on capturing easy opportunities to increase sales to professional customers and achieve cost savings. Notably, Lowe’s has maintained a strong financial position with a healthy gross profit margin of 33.2% and has demonstrated its commitment to shareholders by raising its dividend for 41 consecutive years. For deeper insights into Lowe’s financial health and growth prospects, InvestingPro subscribers can access comprehensive analysis and additional ProTips.
Bernstein suggests that Lowe’s, with its greater exposure to do-it-yourself (DIY) and discretionary categories, is likely to experience a sharper rebound in the event of a market recovery. This contrasts with Home Depot’s more complex strategy targeting professional customers, which the analysts note is not a guaranteed success and could potentially affect profit margins.
The analysts concluded that in the short term, both Home Depot and Lowe’s are expected to be influenced more by housing market dynamics and the market’s inflation and interest rate expectations rather than by their own fundamentals.
In other recent news, Lowe’s Companies Inc. has been the focus of several analyst updates and strategic developments. Truist Securities adjusted its outlook for Lowe’s, slightly increasing the stock price target to $308 while maintaining a Buy rating. The firm revised its earnings estimates for the coming years, anticipating a modest increase in comparable sales and earnings per share for 2025. Meanwhile, RBC Capital Markets made a minor adjustment to its price target for Lowe’s, setting it at $292 and maintaining a Sector Perform rating. The company confirmed its 2024 guidance and outlined a plan to open new stores and achieve significant productivity savings by 2025.
Piper Sandler also expressed confidence in Lowe’s by affirming an Overweight rating with a $307 price target, highlighting the company’s Total (EPA:TTEF) Home Strategy as a key growth driver. This strategy focuses on increasing professional customer penetration, boosting online sales, expanding home services, and enhancing space productivity. Piper Sandler’s optimism is echoed in the firm’s belief that Lowe’s is well-positioned to gain market share during the anticipated expansion cycle. Additionally, Truist Securities noted Lowe’s strategic initiatives, such as merchandising enhancements and supply chain improvements, as factors that could lead to double-digit EPS growth beyond 2026.
The company’s ongoing focus on margin expansion and alternative revenue streams, such as its Marketplace and Media businesses, has been recognized as a positive move. These developments suggest that Lowe’s is strategically preparing for a recovery in the home improvement sector. Despite varying price targets and ratings, analysts generally maintain a positive outlook on Lowe’s future performance.
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