Core Insights - Home Depot and Lowe's are major players in the home improvement retail sector, with Home Depot leading in market capitalization at approximately $355 billion, while Lowe's stands at about $139 billion [2][3] - Both companies are facing a challenging home improvement market characterized by cautious consumer spending and slower housing turnover, raising questions about their respective investment potentials for 2026 [4] Home Depot Analysis - Home Depot's growth strategy is increasingly focused on its Pro ecosystem, enhanced by the SRS and GMS platforms, which facilitate deeper penetration into specialty building materials and cross-selling opportunities [5] - The introduction of an AI-powered tool for professional contractors aims to streamline project planning and material estimation, significantly improving efficiency compared to traditional methods [6] - Despite these advancements, Home Depot is experiencing structural challenges, with a modest 0.2% increase in comparable sales in Q3, and a noted decline in customer transactions by 1.6% [8][10] - The company reported a lack of storms affecting sales in categories like roofing and plywood, contributing to weaker demand visibility and margin pressure [9] Lowe's Analysis - Lowe's is positioning itself with a "Total Home Strategy" that caters to both DIY homeowners and professional contractors, bolstered by the acquisition of Foundation Building Materials (FBM) to enhance its product offerings [11][12] - The integration of AI technology has improved project planning and inventory management, leading to higher customer satisfaction and operational efficiency [13] - Lowe's focus on high-growth categories and a unique market delivery network positions it well to capitalize on the current housing market dynamics, particularly the "lock-in effect" [14] - The company is projected to achieve a 2.9% increase in sales and a 2.2% rise in EPS for the current fiscal year, with an expected 8.7% sales growth for the next fiscal year [19] Comparative Performance - Over the past six months, Home Depot shares have increased by 2.8%, while Lowe's shares have surged by 17.6%, indicating stronger market performance for Lowe's [23] - Home Depot's forward P/E ratio is 23.63, below its one-year median, while Lowe's stands at 19.19, above its median, suggesting differing valuations [25] - Analysts suggest that Lowe's is a more compelling investment choice for 2026 due to its operational efficiency and strategic focus, despite Home Depot's established market presence [26]

Lowe’s Companies, Inc. (NYSE:LOW) is included among the 15 High Quality Dividend Stocks for Long-Term Investors. Telsey Advisory Sees Long-Term Strength in Lowe’s (LOW) Despite Target Reduction Photo by NeONBRAND on Unsplash On November 20, Telsey Advisory trimmed its price target on Lowe’s Companies, Inc. (NYSE:LOW) to $28​5 f‌rom $305 b⁠ut​ mai‍ntained a​n Outperform rating. After reviewing the third-q‍uarter res‌ults, the firm said it st‌ill expects Lowe’s to ou‍tp‍erform the broader industry thanks ...

Financial Data and Key Metrics Changes - Third quarter sales reached $20.8 billion, with comparable sales increasing by 0.4% year-over-year, despite a 100 basis point headwind from hurricanes [5][32] - Adjusted diluted earnings per share were $3.06, reflecting a 6% increase compared to the previous year [5][31] - Adjusted operating margin expanded by approximately 10 basis points, resulting in an adjusted operating margin rate of 12.4% [5][33] - Gross margin improved to 34.2%, up 50 basis points from the prior year [33] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in 10 of 14 merchandise divisions, with notable strength in home decor, appliances, flooring, and paint [17][32] - Online sales grew by 11.4% during the quarter, driven by increased traffic and strong conversion rates [7] - Home services experienced double-digit growth, contributing to the overall positive performance [27] Market Data and Key Metrics Changes - The U.S. homeowner market remains healthy, with strong balance sheets and continued consumer spending, although affordability issues persist [14][15] - Home equity levels are high, averaging around $400,000, which may encourage homeowners to invest in their existing properties rather than moving [15][16] Company Strategy and Development Direction - The company is focused on its 2025 Total Home Strategy, which includes enhancing pro offerings, accelerating online sales, and leveraging loyalty programs [6][8] - The acquisition of Foundation Building Materials (FBM) aims to expand product offerings and enhance fulfillment capabilities, particularly in urban markets [12][13] - Investments in AI are expected to improve customer engagement and operational efficiency, with virtual assistants driving sales and customer satisfaction [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the macro environment, noting that lower interest rates could spur demand in the home improvement sector [15][16] - The company anticipates flat comparable sales for the year, with expectations of approximately $86 billion in total sales, including FBM [37] - Management highlighted the importance of operational discipline and strategic investments in positioning the company for long-term growth [38] Other Important Information - The company is on track to achieve a multi-year goal of reducing in-store SKU count by 15% by the end of 2025 [24] - The marketplace initiative is showing early promise, exceeding expectations in seller onboarding and customer adoption [78][80] Q&A Session Summary Question: How is the company thinking about the trend in the business in light of recent performance? - Management noted positive comp performance to start the quarter and improvements in top-line results since exiting October, indicating that key elements of the Total Home Strategy are working [41][42] Question: What has changed in the kitchen and bath category? - Management believes the company is taking market share in this space, supported by improved technology and a better go-to-market strategy [48][49] Question: Can you elaborate on the improving pro survey sentiment? - Management reported that 75% of small to medium pros feel confident in their job prospects, with ongoing investments in loyalty programs and fulfillment driving growth [55][57] Question: What is the company's strategy for the medium to larger pro market? - The strategy focuses on leveraging the MyLowe's Pro Rewards platform and enhancing product offerings to capture market share in the small to medium pro segment [70][71] Question: What is the initial performance of the marketplace? - Management expressed excitement about the marketplace launch, noting it is exceeding expectations in financial performance and seller quality [77][78]

Financial Data and Key Metrics Changes - Third quarter sales reached $20.8 billion, with comparable sales increasing by 0.4% year over year, despite a 100 basis point headwind from hurricanes [5][32] - Adjusted diluted earnings per share were $3.06, reflecting a 6% increase compared to the previous year [5][31] - Adjusted operating margin expanded by approximately 10 basis points, resulting in an adjusted operating margin rate of 12.4% [5][33] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in 10 of 14 merchandise divisions, with notable strength in appliances, flooring, paint, and kitchens and bath [17][32] - Online sales grew by 11.4% during the quarter, driven by increased traffic and strong conversion rates [7] - Home services experienced double-digit comparable sales growth, indicating strong performance in this key initiative [27] Market Data and Key Metrics Changes - Monthly comparable sales were up 2.5% in August, 0.9% in September, and down 2.6% in October, reflecting storm-related demand impacts [32] - Inventory at the end of Q3 was $17.2 billion, down approximately $400 million year over year, aided by inventory productivity initiatives [33] Company Strategy and Development Direction - The company is focused on its 2025 Total Home Strategy, which includes enhancing pro offerings, accelerating online sales, and leveraging loyalty programs [6][8] - The acquisition of Foundation Building Materials (FBM) aims to expand product offerings and enhance fulfillment capabilities, particularly in urban markets [12][13] - Investments in AI capabilities are expected to improve customer engagement and operational efficiency [10][11] Management's Comments on Operating Environment and Future Outlook - The management expressed confidence in the long-term health of the home improvement sector, despite current consumer anxiety and economic uncertainty [15][16] - The potential for lower interest rates and strong homeowner equity could spur demand for home improvement projects [15][66] - The company anticipates flat comparable sales for the year, with expectations of approximately $86 billion in total sales, including FBM [37] Other Important Information - The company has been recognized for its AI adoption, achieving a milestone award from OpenAI [11] - The company is committed to supporting veterans through community initiatives, including the Freedom Hill project [29] Q&A Session Summary Question: Thoughts on business trends and performance outlook for 2026 - Management noted positive comp performance to start the quarter and improvements in top-line performance since exiting October, indicating that key elements of the Total Home Strategy are working [41][42] Question: Changes in kitchen and bath performance - Management believes Lowe's is gaining market share in the kitchen and bath space due to improved technology and a better go-to-market strategy [48][49] Question: Improving pro survey sentiment and its implications - Management reported that 75% of pros feel confident in their job prospects, with ongoing investments in loyalty programs and fulfillment driving growth [55][57] Question: Macro environment and housing market outlook - Management acknowledged elevated mortgage rates but highlighted strong homeowner equity as a potential driver for future discretionary spending [65][66] Question: Strategy for medium to larger pro customers - Management emphasized the importance of the Milo's Pro Rewards loyalty platform and the integration of FBM to enhance service offerings for pro customers [70][71]

Financial Data and Key Metrics Changes - Third quarter sales reached $20.8 billion, with comparable sales increasing by 0.4% year over year, despite a 100 basis point headwind from Hurricanes Helene and Milton [4][29] - Adjusted diluted earnings per share were $3.06, reflecting a 6% increase compared to the previous year [4][28] - Gross margin improved to 34.2%, up 50 basis points from the prior year [30] - Adjusted operating margin rate was 12.4%, an increase of 10 basis points year over year [30] - Inventory at the end of Q3 was $17.2 billion, down approximately $400 million compared to the previous year [30] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in 10 of 14 merchandise divisions, with notable strength in appliances, flooring, paint, and kitchens and bath [15][29] - Online sales grew by 11.4% during the quarter, driven by increased traffic and strong conversion rates [5] - Home services experienced double-digit comparable sales growth, indicating strong performance in this key initiative [24] Market Data and Key Metrics Changes - The U.S. homeowner market remains healthy, with strong balance sheets and continued consumer spending, although affordability and economic uncertainty weigh on consumer confidence [12][13] - The average homeowner has record levels of equity, approximately $400,000, which may lead to increased investment in home improvement projects [13] Company Strategy and Development Direction - The company is focused on its 2025 Total Home Strategy, which includes enhancing pro offerings, accelerating online sales, and leveraging loyalty programs [5][6] - The acquisition of Foundation Building Materials (FBM) aims to expand product offerings and enhance fulfillment capabilities, particularly in urban markets [11][12] - Investments in AI are expected to improve customer engagement and operational efficiency, with virtual assistants significantly increasing conversion rates [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the long-term health of the home improvement sector, despite current macroeconomic uncertainties [14] - The company anticipates that lower interest rates could stimulate demand for home improvement projects, particularly through home equity loans [13][64] - The outlook for 2026 remains cautious, with expectations for flat comparable sales for the year [33] Other Important Information - The company is on track to achieve its multi-year goal of reducing in-store SKU count by 15% by the end of 2025 [21] - The marketplace initiative is showing early promise, exceeding expectations in seller onboarding and customer adoption [72][73] Q&A Session Summary Question: How is the business trend looking in light of recent performance? - Management noted positive comp performance to start the quarter, with improvements in top-line performance since exiting October [37][39] Question: What is the outlook for kitchen and bath categories? - Management believes Lowe's is gaining market share in kitchen and bath, supported by improved technology and product offerings [45][46] Question: Can you elaborate on the improving sentiment among pros? - The small to medium pro business remains stable, with 75% of pros feeling confident in their job prospects [52] Question: How does the company view the current housing market? - Management acknowledged elevated mortgage rates but highlighted the strong equity position of homeowners as a potential driver for future home improvement spending [62][64] Question: What are the early margin scenarios for FBM and ADG? - Initial estimates suggest a 50 basis point impact on margins in 2026, with a focus on gross margin improvements [56]

Financial Performance - The company delivered positive comp sales growth[3] - Gross margin was 34.2%, a +50 basis points increase compared to the prior year[3] - Operating margin was 11.9%, a -65 basis points decrease compared to the prior year[3] - Adjusted operating margin was 12.4%, a +10 basis points increase compared to the prior year[3] - Diluted EPS was $2.88, a -3.7% decrease compared to the prior year[3] - Adjusted diluted EPS was $3.06, a +5.9% increase compared to the prior year[3] - The company returned $673 million to shareholders through dividends[3] Sales Trends - Overall comp sales increased by +0.4%[3] - Comp transactions increased by +2.5%[5] - Comp average ticket decreased by -2.6% to $106.26[5] - Online sales growth decreased by -3.0%[5] Strategic Initiatives - The company closed on the acquisition of Foundation Building Materials[1,6]

Core Insights - Lowe's Companies, Inc. has a market capitalization of $136.1 billion and is a leading home improvement retailer focused on enhancing homes and businesses through its Total Home Strategy [1] - The company is set to announce its fiscal Q3 2025 results on November 19, with analysts expecting an adjusted EPS of $3, reflecting a 3.8% increase from the previous year [2] - For fiscal 2025, an adjusted EPS of $12.32 is anticipated, marking a 2.7% rise from fiscal 2024, with further growth expected to $13.31 in fiscal 2026 [3] Financial Performance - Lowe's shares have declined nearly 9% over the past 52 weeks, underperforming the S&P 500 Index's 16.9% rise and the Consumer Discretionary Select Sector SPDR Fund's 19.4% return [4] - The company reported a better-than-expected Q2 2025 adjusted EPS of $4.33 and raised its annual sales forecast to between $84.5 billion and $85.5 billion [5] Analyst Sentiment - Analysts maintain a cautiously optimistic view on Lowe's stock, with a "Moderate Buy" rating. Among 29 analysts, 18 recommend "Strong Buy," one suggests "Moderate Buy," nine indicate "Hold," and one gives "Strong Sell" [6] - The average analyst price target for Lowe's is $282.12, indicating a potential upside of 16.2% from current levels [6]

Financial Data and Key Metrics Changes - The company reported a positive comp growth of 4.7% in July, improving from negative comps in May and positive comps in June, indicating a strong exit rate from the second quarter [11] - The management expressed cautious optimism regarding consumer health, noting that homeowners are willing to spend when they perceive value [12][13] Business Line Data and Key Metrics Changes - The acquisition of Foundation Building Materials (FBM) is expected to enhance the company's capabilities in serving large professional customers, which is a segment not significantly served by the company previously [5][6] - FBM's diverse customer base includes approximately 45% residential and 55% commercial, which aligns with the company's strategy to expand its market presence [4] Market Data and Key Metrics Changes - The company identified a total addressable market of $250 billion for large professional customers, which presents new opportunities following the acquisition of FBM [5][30] - The management highlighted a significant need for 18 million new homes by 2033, indicating a strong demand in the housing market that the company aims to capitalize on [7][28] Company Strategy and Development Direction - The company is focused on retail fundamentals and has made significant investments over the past seven years to modernize its strategy for an omnichannel retail environment [10] - The management emphasized the importance of a balanced capital allocation strategy, which includes investments in business growth, dividend increases, and share repurchase plans once leverage targets are met [26][31] Management Comments on Operating Environment and Future Outlook - The management anticipates stable consumer behavior in the second half of the year, with potential tariff-related price increases being the only significant concern [40] - The company is closely monitoring the mortgage rate environment, believing that a sub-6% rate could unlock consumer spending in the housing market [14][15] Other Important Information - The company has shifted its sourcing strategy, with 60% of goods now sourced from the U.S., reducing dependency on China [20][21] - The management is excited about the early results from the new product marketplace initiative, which aims to broaden the product assortment and attract new customers [35][36] Q&A Session Summary Question: Expectations for consumer health in the back half of the year - The management expects consumer health to remain stable, with no significant changes anticipated in behavior [40] Question: Pricing actions taken and elasticity response - The management noted that the first half did not see significant tariff-related pricing adjustments, but they are prepared to leverage their portfolio for competitive pricing in the back half [42][44] Question: Inventory growth expectations and supply chain disruptions - The management expressed confidence in their inventory position, stating that most second-half buys are already completed and there are no concerns about supply chain disruptions [46][48] Question: Non-tariff margin drivers outlook - The management does not foresee any significant expense-related increases and is committed to productivity improvement initiatives [49][52] Question: Market share consolidation outlook - The management believes that while there will be additional consolidation in the market, the pro market will remain fragmented with many regional players [53][54]

Financial Data and Key Metrics Changes - In Q2 2025, the company reported sales of $24 billion, with comparable sales increasing by 1.1% [7][26] - Adjusted diluted earnings per share reached $4.33, marking a 5.6% increase compared to the previous year [7][25] - Adjusted gross margin improved to 33.8%, up 37 basis points from the prior year [26] - Inventory at the end of Q2 was $16.3 billion, down $499 million year-over-year [27] Business Line Data and Key Metrics Changes - Positive comparable sales were reported in nine out of fourteen merchandise divisions, particularly in pro and online segments [12] - Strong performance was noted in seasonal categories, especially in lawn and garden, tools, and building products [12][14] - The flooring category showed strength across carpet, tile, and adhesives, with the introduction of Dal Tile expected to enhance offerings [65] Market Data and Key Metrics Changes - The macro environment remains supportive for homeowners, with strong balance sheets and low unemployment contributing to a positive outlook for the home improvement industry [10] - Analysts estimate approximately $50 billion in deferred project demand due to delayed discretionary projects over recent years [10] - The need for an estimated 18 million new homes by 2033 indicates a healthy pipeline for home improvement and new construction [11] Company Strategy and Development Direction - The acquisition of Foundation Building Materials (FBM) is seen as a transformational move to enhance the company's pro offerings and diversify revenue streams [5][6] - The company aims to leverage FBM's capabilities to serve larger professional customers within a $250 billion total addressable market [5][42] - The strategy focuses on integrating acquisitions to create a comprehensive interior solutions platform for large pro customers [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the uncertain environment while providing value to customers [28] - The outlook for the home improvement market remains flat, with expectations for gradual improvements in the underlying business [29][77] - Management highlighted the importance of continuous improvement initiatives and the positive sentiment among professional customers regarding their job prospects [21][64] Other Important Information - The company generated $3.7 billion in free cash flow during Q2, with $1.3 billion allocated for the acquisition of ADG [28] - The acquisition of FBM is expected to close in 2025, with a purchase price of $8.8 billion [44] - The company plans to maintain its investment-grade credit ratings while focusing on growth and shareholder returns [45] Q&A Session Summary Question: Can you expand on Foundation's year-to-date performance in 2025? - Management refrained from providing specific details until after the transaction closes but expressed excitement about FBM's historical performance [50] Question: What percentage of the 33,000 SKUs will be net new to Lowe's offering? - Management indicated it is too early to provide specifics but sees significant opportunities for complementary products [51] Question: Can you provide insights from the pro sentiment survey? - Pros reported stable backlogs and confidence in job prospects, although labor costs are rising [63][64] Question: What is happening in the flooring category? - Strength was noted in both DIY and pro segments, with the introduction of Dal Tile expected to enhance offerings [65] Question: Can you provide customer numbers or makeup for FBM? - FBM has about 40,000 customers, with a balanced mix of residential and commercial clients [72] Question: How much of the guidance for the back half is due to pricing? - Management indicated that pricing strategies are dynamic and will continue to be competitive [78] Question: Is there a secondary investment cycle emerging in the core Lowe's supply chain? - Management acknowledged the need for continuous investment in the platform but does not foresee another large acquisition soon [86]

Financial Data and Key Metrics Changes - The company reported sales of $24 billion for the quarter, with comparable sales increasing by 1.1% [6][24] - Adjusted diluted earnings per share reached $4.33, marking a 5.6% increase compared to the previous year [6][23] - Adjusted gross margin improved to 33.8%, up 37 basis points from last year [25] - Inventory at the end of Q2 was $16.3 billion, down $499 million year-over-year [26] Business Line Data and Key Metrics Changes - Positive comparable sales were delivered in nine of the fourteen merchandise divisions, with notable growth in pro and online sales [11][12] - The lawn and garden category saw strong performance, driven by live goods and seasonal offers [12] - Building products, including plumbing repair and drywall, also experienced positive comps, reflecting ongoing momentum in repair and maintenance projects [13] Market Data and Key Metrics Changes - The macro environment remains supportive for homeowners, with strong balance sheets, wage growth, and low unemployment [9] - Analysts estimate approximately $50 billion in deferred project demand due to delayed discretionary projects over the past few years [9] - The need for an estimated 18 million new homes by 2033 indicates a healthy pipeline for home improvement and new construction [10] Company Strategy and Development Direction - The acquisition of Foundation Building Materials (FBM) is seen as a transformational move to enhance the company's pro offerings and capture a larger share of the $250 billion total addressable market [5][39] - The company aims to integrate FBM's capabilities to improve job site delivery and expand product offerings for pro customers [37][39] - The strategy focuses on leveraging acquisitions to strengthen the pro distribution platform and enhance overall growth potential [38][89] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term outlook for the home improvement industry, driven by aging housing stock and pent-up demand [9][10] - The company anticipates a flat home improvement market for the remainder of the year, with expectations for gradual improvements in underlying business performance [28][72] - Management highlighted the importance of continuous improvement initiatives to navigate the uncertain environment and deliver value to customers [27][60] Other Important Information - The company generated $3.7 billion in free cash flow during the quarter and paid $645 million in dividends [27] - The acquisition of ADG was completed in June, and it is expected to complement the FBM acquisition by offering a comprehensive interior solutions platform [10][41] Q&A Session Summary Question: Can you expand on Foundation's year-to-date performance in 2025? - Management refrained from providing specific details until after the transaction closes but expressed excitement about FBM's historical performance [46] Question: What percentage of the 33,000 SKUs will be net new to Lowe's? - Management indicated it is too early to provide specifics but sees significant opportunities for complementary products [47] Question: Can you elaborate on the pro sentiment survey results? - Pros reported stable backlogs and confidence in job prospects, although labor costs are rising [58][60] Question: What is the customer makeup of FBM? - FBM serves about 40,000 customers with a balanced mix of 45% residential and 55% commercial, minimizing concentration risk [68] Question: How does the company plan to leverage the acquisitions? - The combination of FBM and ADG is expected to create differentiation and allow the company to capture a larger share of the pro market [95]