Lowe's Lower on Disappointing Guidance

Lowe's is trading down early Monday following its report of disappointing Q4 guidance and a cut to full fiscal year (ending Feb. 1) guidance below expectations. Lowe's said Q3 net income fell by 10% to $643 million, or $0.43/share. Despite beating analyst estimates of $0.41/share, analysts pointed out a $0.05/share reduction in self-insurance liabilities some believed should be adjusted out. Q3 sales were up 3% to $11.6B, missing analysts' average estimate of $11.78B. For Q4, Lowe's forecast EPS of $0.25 to $0.29, compared to analyst estimates of $0.36. Full-year EPS estimates were cut to $1.83 to $1.87, from $1.97 to $2.01 previously; in late September, Lowe's said EPS may come in at the low end or slightly below its forecast, at which time analysts were expecting $2.01/share. Reuters Estimates show a consensus estimate of $1.93. Lowe's cited several factors impacting its Q3 results with emphasis on the housing market slump. The company called its Q4 guidance "conservative," and said it expects industry pressures to continue "well into 2008" (earnings call transcript later today). Analysts said they expect current 2008 consensus EPS estimates of $2.02/share to fall to at least $1.92. Lowe's said it is still gaining market share according to third-party data. Shares of Lowe's lost 0.2% to $25.01 on Friday and were last trading at $24.10 (-3.6%) in pre-market activity.

Sources: Press release, Bloomberg, MarketWatch
Commentary: Citi Lowers Estimates For Home Depot, Lowe's On Housing Weakness • Lowe's Predicts Earnings Shortfall • Home Depot: Bye Bye Buyback
Stocks to watch: LOW. Competitors: HD, SHLD. ETFs: RTH, XLY, PKB

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Comments

[Brian Croner]

They're in a nasty capex battle with HD.