Lowe's Stock Falls Despite Earnings Beat

Investors Focus on Soft Big-Ticket Items

Lowe's Companies, Inc. (NYSE: LOW) stock fell in premarket trading on Thursday after the home improvement retailer reported better-than-expected earnings for the fiscal first quarter. At 8:15 AM ET, Lowe's shares were down 2.1% at $183.02.

Earnings and Revenue Beat Estimates

Lowe's reported $2.33 per share of earnings in the first quarter that concluded on April 29th. This figure topped analysts' estimates of $2.24 per share. Adjusted for one-time items, the company earned $3.26 per share in Q1 versus the FactSet consensus of $3.12. Lowe's also topped revenue estimates, posting a 6.5% annualised growth to $23.64 billion. According to FactSet, experts had forecast $23.40 billion of revenue.

Big-Ticket Sales Growth Slows

Despite the earnings beat, investors seem concerned about the slowdown in big-ticket sales that usually contribute more to overall profitability. In Q1, sales of appliances and tools grew by only 1.7%, while home décor sales were up 5.0%. However, DIY-related categories continued to perform well as sales of lawn and garden products jumped by 23.5% in the recent quarter. Online sales also saw an annualised increase of 18%.

Outlook

For the full year, Lowe's now expects its earnings per share to fall between $13.60 and $14.00. This forecast is in line with the analysts' consensus of $13.76 per share. The home improvement retailer also lifted its guidance for comparable-store sales growth to a range of 3.0% to 4.0% from the previously estimated 2.5% to 3.5%.

Conclusion

Lowe's stock is down about 10% year-to-date, performing slightly downbeat in the market in 2023. However, at $183.02 per share, it is still trading higher than its pandemic low of $81.69 per share in March 2020.