Buy, Sell Or Hold Lowe's Stock?

Core Insights - Lowe's reported quarterly sales of $20.2 billion and earnings of $2.89 per share, exceeding estimates but declining from the previous year's $20.5 billion and $3.06 per share [1] - The company experienced a 1.1% decline in comparable sales for the third quarter due to rising interest rates and economic unpredictability, impacting consumer spending [1][2] - The operating margin fell 60 basis points year-over-year to 12.5% due to increased supply chain investments [1] Financial Performance - Lowe's stock fell 4.6% on November 19, 2024, compared to a 0.4% growth in the S&P 500 index, while Home Depot's stock decreased by 0.9% [1] - The stock's annual returns have been volatile: 63% in 2021, -21% in 2022, and 14% in 2023, contrasting with the more stable Trefis High Quality Portfolio [4] Market Conditions - The Federal Reserve's aggressive interest rate hikes since 2022 have led to higher mortgage rates, suppressing home sales, with current rates averaging 6.78% [2] - The decline in home prices may negatively impact Lowe's in the short term, although homeowners are expected to continue spending on property maintenance [2][3] Future Outlook - For the full year 2024, Lowe's anticipates total sales between $83 billion and $83.5 billion, with comparable sales expected to decline between -3.0% and -3.5% [5] - The company expects adjusted diluted earnings per share of approximately $11.80 to $11.90, slightly revised from previous forecasts [5][6] Valuation - Lowe's valuation has been revised to $260 per share based on an expected EPS of $11.89 and a P/E multiple of 21.9x for fiscal year 2024 [6]