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Summary

  • Lowe's beat analyst expectations for the quarter, but lowered its full-year same-store guidance.
  • This contradicts the new home startup data that came in yesterday.
  • Lowe's could be on shaky ground heading out of the homebuilding season and into winter.

Lowe's (NYSE:LOW) topped analyst consensus estimates this morning, but the guidance threw a damp rag over the report.

The company cited that poor weather conditions didn't affect it as much as many had predicted. CEO Robert A. Niblock noted that he believes spending in home improvement will continue to progress with the economy.

As new home startups were the news that fueled the market yesterday, companies like Lowe's and Home Depot are the two candidates likely to benefit for investors that want to play the housing market via retail channels. Yesterday's headline was that home building startups rocketed, rising 15.7% from June, crushing an already adjusted estimate to the upside for the month.

Building permits, as noted in the linked article above, also came in over a million; a strong figure for those looking for future growth in the housing sector.

Lowe's consensus estimates heading into this morning's report were for EPS of $1.02 and revenue of $16.5 billion. Year-over-year, the company had significant growth, posting $1.04 EPS vs. $0.88 last year and improving revenue from $15.72 billion to $16.6 billion.

The other big metric, as with any retailer, was same-store sales. The company posted growth of 4.4%. However, Lowe's did lower its same-store growth prospects for the year from 4% down to 3.5%. This seems to be the figure that set investors awry this morning.

As of 7 AM, shares are off $1.52, or about 2.95%, to $50.00 even.

The Peel's Feel:

We certainly don't like to see the guidance lowered in fair contrast to the news that we had received yesterday. We're likely to avoid looking at Lowe's as a potential vehicle for investment for this reason.

In addition, we're not excited about the prospect of a company lowering same-store sales guidance to the order of magnitude in which Lowe's just did in the broader economic climate.

As we expect a correction from the markets before the end of this year, this is likely going to be a name we're to going to get involved with.

If you want a vehicle to invest in real estate, we still like high-dividend paying commercial REITs.

Source: Lowe's Lowers Outlook, Even As New Home Starts Rocket

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