Lowe’s Q2 earnings on deck: What to expect

Home-improvement retailer Lowe’s Companies (NYSE:LOW) is set to report second quarter results on Tuesday, before markets open.

Wall Street expects the North Carolina-based company to post EPS of $4, while revenue is expected to fall 4% to $23.96 billion during the quarter.

Home building stocks are facing challenges as inflation and uncertainty around interest rate cuts pressured big ticket discretionary spending. However, Lowe’s said it saw traction for small scale seasonal projects, as the company topped its first quarter results in May.

Analysts are still cautious, with Seeking Alpha analysts and Seeking Alpha’s Quant ratings considering the stock a Hold.

Earlier in the month, investors were also disappointed when Home Depot (HD) set full-year guidance below expectations, with the company expecting comparable sales to decline about 3% to 4% in FY24, compared to a prior outlook for a decline of about 1%.

Seeking Alpha analyst Shri Upadhyaya said Home Depot’s warning of a difficult period for home improvement space raises concerns.

“Lowe’s has historically lagged behind Home Depot in financial performance and operational strategy. This could make it more vulnerable than Home Depot in a potential downturn,” noted Upadhyaya.

Another Seeking Alpha analyst, Ken Taylor said despite potential for future growth, a cautious approach is advised with Lowe’s due to a weakening financial outlook and uncertain economic conditions. He also said near-term challenges in consumer spending and debt repayment need to be addressed when it comes to Lowe’s.

Wall Street analysts, however, rated the stock a Buy.

“The home improvement sector is moving towards the later stages of post-pandemic digestion, with LOW set to favorably lap the more pronounced downshift in DIY spending starting in Q3,” Mizuho said.

Over the last one year, Lowe’s has beaten EPS estimates 100% of the time and has beaten revenue estimates 75% of the time.

Over the last three months, EPS estimates have seen two upward revisions and 26 downward revisions. Revenue estimates have seen 13 upward revisions versus nine downward moves.

Lowe’s stock has gained 8% so far this year, compared to the over 16% rise in the broader S&P500 Index.