Lowe’s has reported higher-than-expected earnings for four of the past five quarters.
Justin Sullivan/Getty Images
The home-improvement retailer Lowe’s turned in far stronger first-quarter earnings than Wall Street analysts expected and raised its sales forecast for the year, but the stock fell in premarket trading anyway.
The drop, however, doesn’t appear to signal deep concern among investors.
Lowe’s (ticker: LOW) reported $3.21 in per-share earnings from $24.4 billion in sales. Wall Street was looking for $2.59 and $23.8 billion, respectively. Comparable-store sales in the U.S. rose 24.4%, while same-store sales across all geographic markets rose almost 26% year over year.
Things look pretty good for housing-related retailers these days. This quarterly report is the second consecutive big earnings “beat” from Lowe’s and the fourth outperformance in the past five quarters.
Shares were down 1.4% in premarket trading, though. Broader market weakness is part of the reason. Futures on the S&P 500 and Dow Jones Industrial Average were down as well, falling 0.8% and 0.6%, respectively.
Home Depot (HD) shares are another reason. Home Depot posted its own strong quarter Tuesday, easily beating analysts’ projections, with sales growth that was a touch stronger than at Lowe’s. Its shares closed down 1% in response to the quarterly earnings report.
Home Depot’s same-store sales rose 31% year over year, beating Lowe’s by a few percentage points.
Both stocks are up roughly 20% year to date, better than comparable gains of the overall market. Selling a little stock after good news and buying stock back after small dips are common trading actions in bull markets. And housing and housing- related stocks are in a bull market. Home-building shares in the S&P, for instance, are up 27% year to date and 68% over the past year.
Home Depot didn’t provide a forward outlook in its earnings release. Lowe’s did and raised its full-year sales guidance from about $84 billion to $86 billion. Wall Street, however, is ahead of the company, predicting about $89 billion in fiscal 2022 sales. Lowe’s fiscal year finishes up at the end of January 2022.
Lowe’s management is also guiding to a 12% operating profit margins for the current fiscal year. This past year, Lowe’s operating profit margin came in at about 10.8%. For fiscal year 2022, Wall Street projects an 11.7% operating profit margin.
Lowe’s management hosts a conference call at 9 a.m. Eastern time to discuss results. Analysts and investors will be eager to hear about sales growth and how growth will impact profit margins in the year ahead.
Write to Al Root at [email protected]
