Lowe’s stock rating reiterated at In Line by Evercore ISI ahead of Q2

Investing.com - Evercore ISI has reiterated its In Line rating and $245.00 price target on Lowe’s (NYSE:LOW), currently valued at $141.26 billion, ahead of the company’s second-quarter earnings report scheduled for Wednesday, August 20. According to InvestingPro analysis, the stock appears slightly overvalued at current levels.

The research firm has initiated a negative tactical action point (TAP) into the earnings release, noting that while Lowe’s guided to fiscal 2025 EPS of $12.28 at the mid-point with a flat to +1% comparable sales growth, the stock may have gotten ahead of itself. Lowe’s shares have risen 15% over the past month, outperforming both Home Depot and the broader market. The company maintains a strong dividend track record, having raised dividends for 41 consecutive years, with a current yield of 1.9%.

Evercore ISI believes the recent stock movement was driven by modestly improved sales trends combined with falling mortgage rates, which likely prompted some covering. The firm notes that the home improvement backdrop remains lackluster, particularly in the DIY segment where Lowe’s has greater exposure than Home Depot .

For the second quarter, Evercore ISI models comparable sales growth of 1%, which is 50 basis points below Lowe’s initial May guidance, with operating margins up 10 basis points and EPS of $4.22 versus the Street consensus of $4.25. The firm also points out that OpenBrand data suggests Lowe’s has lost consumer share in appliances for the second consecutive quarter.

The recent ADG acquisition by Lowe’s leaves limited room for stock buybacks this year, potentially removing some support for the stock, especially if mortgage rates stop falling, according to the research firm. Despite these challenges, InvestingPro data shows Lowe’s maintains a GOOD overall financial health score, operating with moderate debt levels. Get access to 8 more exclusive ProTips and comprehensive financial analysis through InvestingPro’s detailed research reports. Evercore ISI suggests the stock could move back toward the $230 to $240 range following the earnings report.

In other recent news, Lowe’s Companies, Inc. has completed its acquisition of Artisan Design Group, a move aimed at enhancing its professional services and distribution channels. This acquisition is expected to accelerate Lowe’s growth in the professional customer segment. Additionally, Lowe’s has announced a 4% increase in its quarterly cash dividend to $1.20 per share, reflecting the company’s confidence in its long-term growth strategy. Meanwhile, at its recent annual meeting, Lowe’s shareholders voted to elect all nominated directors, including Raul Alvarez and Marvin R. Ellison, solidifying the leadership team.

On the analyst front, Mizuho has reiterated its Outperform rating on Lowe’s stock with a price target of $280.00, despite challenges in the home improvement market. Mizuho noted the complex consumer backdrop and sector pressures due to affordability and tariff issues. TD Cowen, however, maintains a Hold rating with a $245.00 price target, acknowledging Lowe’s strategic positioning to manage market complexities, including tariff challenges. The company is reportedly seeing growth in its professional contractor segment, though the DIY sector remains stable. These developments indicate Lowe’s ongoing efforts to navigate a challenging market environment while focusing on strategic growth initiatives.

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