Lowe's Cos. (NYSE:LOW) reported second-quarter earnings before the open Tuesday, surpassing analyst expectations, despite a decline in revenue amid challenging macroeconomic conditions. The home improvement retailer's stock bounced around at the start of Tuesday's session but is currently flat on the day.
Lowe's posted adjusted earnings per share of $4.10 for the quarter ended Aug. 2, 2024, exceeding the analyst estimate of $3.96. However, revenue fell short at $23.59 billion, compared to the consensus estimate of $23.93 billion and down from $25.0 billion in the same quarter last year.
Comparable sales decreased 5.1% YoY, driven by continued pressure in DIY bigger ticket discretionary spending and unfavorable weather impacting seasonal and outdoor categories. This was partially offset by positive comparable sales in Pro and online segments.
"The company delivered strong operating performance and improved customer service despite a challenging macroeconomic backdrop, especially for the homeowner," said Marvin Ellison, Lowe's chairman, president and CEO.
Lowe's updated its full-year 2024 outlook, citing lower-than-expected DIY sales and a pressured macroeconomic environment. The company now expects total sales of $82.7 to $83.2 billion, down from its previous forecast of $84 to $85 billion. Adjusted earnings per share are projected to be between $11.70 and $11.90, lower than the earlier guidance of $12.00 to $12.30.
The revised guidance falls below analyst expectations, with the consensus estimate for full-year EPS at $12.14 and revenue at $84.16 billion.
During the quarter, Lowe's repurchased approximately 4.4 million shares for $1.0 billion and paid $629 million in dividends.
Following the report, analysts at Telsey Advisory Group said that In the near term, "the industry continues to face headwinds related to the soft housing market and consumers remaining cautious with spending, especially on big-ticket products and projects." However, in the long term, the firm believes "Lowe's should remain a share gainer and benefit from its Total Home Strategy—focusing on the Pro, enhancing digital, driving localization, and elevating the assortment."
Analysts at JPMorgan said in their note that the results were "nothing surprising," with margin upside underpinning a more positive view. "Importantly, the gross and operating margin upside in 2Q is consistent with our relatively positive view of LOW’s margin outlook and contrary to the bear case that the company over-earned/under-invested and had high risk implied in its guide," they added.
Analysts at Baird stated: "Nothing all that surprising here and more fuel for the Fed. At ~10% discount to the market, shares likely absorb this reasonably well."
Analysts at RBC Capital told investors in a note that the comp sales decline was largely expected following HD's print last week. "Investors will be pleased to see +MSD Pro comps (vs. +LSD in 1Q), which represents continued outperformance vs. HD, who posted 'negative' comps in the quarter," they added.
Analysts at Stifel wrote: "Weaker results matched muted expectations, but updated guidance includes an improving comparable sales performance across the entirety of the range through the remainder of the year with the performance/update adding to the scrutiny for FY25 with our $12.00 FY25E EPS well below consensus ($13.26)."