Lowe’s (NYSE: LOW) earnings fail to match Wall Street expectations

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On Wednesday Lowe’s (NYSE: LOW) recorded the fourth-quarter revenue. However, earnings went down as profit margins dropped. According to the report, Lowe’s shares had gone down by 8 percent in premarket trading on the news. You can see below a summary of the company compared to expectations from analysts according to Thomson Reuters survey:

  • Revenue was $15.49 versus $15.33 billion
  • Same-store sales had an increase of 4.1 percent versus growth of 3.1 percent
  • The adjusted earnings per share was 74 cents versus 87 cents expected from analysts.

“As we enter 2018, we are working diligently to improve execution with a focus on conversion, gross margin, and inventory management,” CEO Robert Niblock said in a statement. “Given the rapidly evolving competitive landscape, we are also accelerating our strategic investments leveraging the benefits of tax reform.”

Lowe’s experienced a drop in net income to $554 million, compared with the previous year $663 million. If you exclude one-time items, Lowe’s earned 74 cents a share – short of 13 cents based on analyst’s comparison.

The revenue in that period duration went down to $15.49 billion. However, it surpassed Wall Street expectations set at $15.33 billion.

Looking at the Same-stores sales-a major metric for retailers-increased by more than 4 percent, which is higher than what was expected. But, Rival Home Depot recorded an increase of 7.5 percent in that period.

“Home Depot is a much better run company,” Oppenheimer & Co. analyst Brian Nagel told CNBC’s “Squawk Box.” “But as the dust clears today, I think there could be a positive in this [earnings report].”

Just like Home Depot, Lowe’s has had an enormous benefit from a robust U.S housing market and an aging population beginning to invest in permanent residencies. The North Carolina company launched its DIY apps as well as the augmented-reality assistants to meet the needs of a tech-savvy audience and young generation.

While late last year activist investor D.E Shaw & Co criticised Lowe’s for not doing well like its peers, Nagel said on Wednesday that this kind of intervention by the activist is long overdue. Nagel believes that the external pressure should help Lowe’s become aggressive.

The latest initiatives by Lowe’s comprise of reinvesting capital on its workforce, making announcements on bonuses and big package benefits as a result of U.S tax reform and enhancing the supply chain through opening its first direct to consumer center in Nashville, Tennessee.

On Wednesday, the company announced an exclusive partnership with Valspar owner; this makes Lowe’s the major distributor in the home category of specific paint brands.

Looking at Lowe’s 2018 fiscal year, it’s postulated to grow to about 4 percent while same-store sales to rise to about 3.5 percent. The company also plans to build ten new stores by the end of 2018.

As of this week Tuesday, the close market share had gone high by 25 percent from a year ago.

 

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