Lowe’s stock slips as Q4 sales lag expectations

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Lowe’s Companies (NYSE:LOW) stock slid in Wednesday’s premarket trading after posting stronger than expected Q4 profits, but missing on revenue and comparable sales expectations.

For the fourth quarter, the North Carolina-based specialty retailer posted $2.28 in earnings per share, exceeding expectations by $0.07. However, a 5% rise in revenue to $22.4B was notably short of the $22.71B analyst consensus. Additionally, a 1.5% comparable sales decline in the quarter surprised analysts that had expected a positive 0.88% report.

CEO Marvin Ellison announced a $220M award in discretionary and profit-sharing bonuses to associates and store managers. Home Depot (HD) previously announced plans to invest an $1B in annualized compensation for hourly associates in 2023 as the two compete for labor.

"We continue to make strides on our Total Home strategy, with 10% Pro growth in the U.S. and 5% increase in Lowes.com sales,” Ellison said. “I am confident we are making the right investments – in our associates and in our business – to drive long-term growth. We also continue to improve operating margin, demonstrating our ongoing focus on driving productivity across the company.”

Moving forward into 2023, the company expects total sales of approximately $88B to $90B, slightly below the $90.66B consensus. Comparable sales expected to be flat to down 2% as compared to prior year, essentially in-line with the -0.82% expectation on the Street. Management expects diluted earnings per share of $13.60 to $14.00 for the full year, also in-line with the $13.84 consensus.

Shares of the home improvement retailer slipped modestly on thin premarket volume.

Dig into the details of the print.

Comments

[OverTheHorizon]

HD and Lowes have the same problem:
www.reuters.com/...

[Dale Roberts]

Added to Lowe's in my wife's account. Maybe one or two more buys along the way and then we're done.

The stock will buy us a few trips to California and the desert in retirement years. We're cold Canadians. ;)

[GDPPP]

"However, a 5% rise in revenue to $22.4B was notably short of the $22.71B analyst consensus."

How is this notably short? It's not really that short, it's just that analysts were wrong and hate being reminded that they were so..

[pdrozin]

Sold some March 17th $175 strike PUTS today for some nice change. Love the income, happy to buy the shares there if it goes that low.

[chazz91396]

@pdrozin Interesting play, thank you for sharing. I just took a look at the closing premium and I am a bit surprised, because that locks up quite a bit of cash and the IV doesn't create that much of a premium.

[pdrozin]

@chazz91396 Everyone has their magical formula to be sincere. I focus on amount of premium I can get, usually a minimum of about $500 per 5 contracts, probability of being put the shares, usually less than 10%, the actual strike price, if it is an attractive buy level based on solid fundamentals of the company as well as technical analysis and supporting trend lines. Also, and most important, it has to be a solid company, no high flyers, no meme stocks, etc... When all that combines I usually pull the trigger several times per month and add to my income stream. I have been doing this for years, been put shares once or twice maximum, it works for me. Lastly, in a totally down market, just horribly negative trends, I tend to sit back and watch even though volatility is higher, but so is the risk of the unknown as well as being put the shares. My end goal is to collect additional income on stocks I would be happy to unknown at the strike price or lower. Latest targets have been companies like LHX, NSC, LOW, and other high quality names. Last year I collected an additional $29k like this, but also keep in mind my portfolio is large enough to support the exposure. Not everyone will be able to implement the strategy and smaller portfolios make it difficult to sell naked PUTS.

[chazz91396]

@pdrozin Totally understand and well said. Thank you for sharing your strategy. I also sell naked puts as a part of my strategy, but I tend to sell a bit closer to current price.

[bay tracker]

I started at HD Pro desk and later moved to Lowes Pro desk. Mid level management at Lowes was constantly putting down Pro initiatives I had learned at HD. At Lowes DIYers and Contractors were to be treated the same, wrong. DIYers spend hundreds, Contractors spend tens of thousands! Lowes is finally waking up.

[bigfish1977]

No divvy increase? I'll stick with HD

[Deep Value Ideas]

@bigfish1977 $LOW typically announces its dividend increase at the end of May - I am confident they announce another raise. There is still one "old" $1.05 dividend to be announced - expected around mid-March.

[jasonm71]

@bigfish1977 next increase isn’t until August payout

[bigfish1977]

@jasonm71 2.8% yield on HD. 2.1% on LOW

[Just the Millionaire next door]

CEO Marvin Ellison announced a $220M award in discretionary and profit-sharing bonuses to associates and store managers.

Nice to see taking care of employees their biggest asset imo!

[damcooldav3]

@Just the Millionaire next door honestly these days it has to be that way, otherwise nobody will meet production or service requirements to keep up with targets.

[Just the Millionaire next door]

@damcooldav3 Be surprised how many older people just want a part time job to make ends meet.

[onedegree]

@Just the Millionaire next door It's also a great "get out of the house" job. I work at Lowes 3 days a week. Use the money to fund mine and wife's Roth IRAs. I see people I know every time I work and to me that is the best part of the job. Great company!

[rammbler65]

Good results. Earnings beat and revenue increase of 5% (although short of arbitrary expectations). Modestly conservative guidance as expected with macro uncertainty. For this 22 year stockholder, it continues to be a high confidence long term buy and hold.

[damcooldav3]

@rammbler65 did you just copy paste this comment from the other news article? Lol

[rammbler65]

@damcooldav3 yep, lol

[Money 29]

Well managed company with fair valuation dividend king LOW.

[fb132]

Anyone know if management will lower their debt, it has gone up significantly.

[damcooldav3]

@fb132 numbers please if you don’t mind?

[fb132]

@damcooldav3 I remember their long term debt/Capital was at near 100% a few months ago which was already high....but now it's at 153.28%.

[Dale Roberts]

Stronger than expected profits. Revenue up 5%.

More than solid.

Happy to add at any time.

We may get our chances in the recession.

[Uncorrelated]

This too shall pass, it's one of my forever-holds.

[ronclaros]

Outstanding considering it's been the winter months. Spring and summer will bring tremendous competition to these giants.

[wam350]

Disappointing but I will continue building a position for the future.