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Lowe’s Stock: First-Quarter Sales Slip As Home Depot Issues Dour 2023 Warning

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(Lowe’s Stock) – Despite better-than-expected first-quarter results on Tuesday, Lowe’s stock (LOW) revised its full-year guidance as lumber prices dropped and home improvement enthusiasm faded. Tuesday, LOW advanced.

The second home improvement retailer to reduce its 2023 guidance in as many weeks is Lowe’s. A moderating home improvement market led rival Home Depot to revise its full-year outlook last week.

When the Coronavirus pandemic hit, home improvement retailers did well. Recently, they became popular defensive plays amid inflation and global recession fears. According to Lowe’s and Home Depot’s Q1 financial results, rising interest rates are stifling the mortgage refinancing book that drove pandemic-era sales, and consumers appear cautious amid recession fears.

Lowe’s stock rose 1.7% to 206.59 Tuesday during market trade. Despite reaching a recent high of 212.50 on April 20, Lowe’s stock has moved sideways since then. On Monday, Home Depot stock fell a fraction to 290.66, but advanced 1.2% on Tuesday.

The Commerce Department will release a report on new home sales for April at 10 a.m. Eastern Time. A slowdown is expected from 683,000 homes per year in March to 670,000 homes per year in April, according to economists.

Earnings of Lowe’s Stock

Based on Wall Street estimates, Lowe’s earnings will drop 2% to $3.45 per share and revenue will drop 8% to $21.60 billion. FactSet predicted a 3.4% decline in same-store sales.

In Q1, Lowe’s reported EPS of $3.67, up 5% in comparison to $22.35 billion in revenue. In the first quarter, same-store sales declined 4.3%.

Home improvement retailer Lowe’s reported lower comparable sales in Q1 due to a combination of falling lumber prices, unfavorable weather, and a decrease in discretionary sales. The reasons for Home Depot’s first-quarter financials were similar last week.

When comparing the performance of Lowe’s Vs. Home Depot, both faced challenges, but Lowe’s, in particular, grappled with a more significant impact on sales due to the mentioned factors.

It now expects sales of between $87-$89 billion in 2023, down from the previous estimate of $88-$90 billion.

According to the company, same-store sales will decrease between 2% and 4%. Adjusted diluted earnings per share are forecast at $13.20-$13.60, down from $13.60-$14.00 previously.

Analysts predict earnings will drop 1% to $13.56 per share in fiscal 2023, while sales will slip 9% to $88.56 billion.

Despite record lumber deflation and unfavorable spring weather, CEO Marvin Ellison said his company is pleased with its performance.

Lowe’s remains optimistic about the medium- to long-term outlook for home improvement and our ability to grow market share, he said.

For the third quarter in a row, Lowe’s stock profits jumped 28% to $2.28 per share as revenue rose 5.2% to $22.445 billion.

Home Depot and Lowe’s follow each other

As sales fell 4% to $37.26 billion, Home Depot’s Q1 earnings dropped 6.6% to $3.82. Comparable sales in the U.S. declined 4.6%.

Based on its revised guidance for 2023, Home Depot expects revenue and same-store sales to decrease by 2% and 5%, respectively, over fiscal 2022. Executives at Home Depot also forecast a 7%-13% drop in diluted earnings per share in 2023.

As we predicted, the home improvement market would be moderate in fiscal 2023. In the quarter, our sales fell short of our expectations primarily due to lumber deflation and unfavorable weather, particularly in our Western division, as extreme weather in California disproportionately affected our results,” said CEO Ted Decker.

Wholesale-Building Products ranks Lowe’s stock fifth in IBD. The Composite Rating of LOW is 75 out of 99. Lowe’s stock also has a Relative Strength Rating of 63. LOW has a 97 out of 99 EPS rating.

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