Lowe’s: Elevated Rates Leave Shares Fully Valued (Rating Downgrade)

Summary:

• Lowe’s shares have underperformed the market due to high interest rates, with a cautious outlook for 2025 amid macroeconomic uncertainties.
• The company’s 2025 scenarios imply about $12–12.50 in EPS and $84 billion in sales, with a focus on improving its pro business and cost-cutting.
• LOW plans to reduce debt, increase capex, and limit share repurchases, prioritizing financial stability over aggressive buybacks in a high-rate environment.
• At 20x forward earnings, Lowe’s shares are expensive for a rate-sensitive stock, leading to my ‘Sell’ rating with a fair valuation of 17–18x earnings or about $220.

While Lowe’s (NYSE:LOW) shares have risen 11% this year, that has significantly underperformed the market, as interest rates have stayed higher for longer, weighing on real estate-related activity. Indeed, as long-term yields have risen the past two months, we have seen shares decline about 10%. I

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.