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2 Large Consumer Cyclical Stocks Post Quarterly Results

- By Alberto Abaterusso

These two large consumer cyclical stocks announced quarterly results on Wednesday.

Shares of Lowe's Companies Inc. (LOW) tumbled 11.85% to $97.94 on Wednesday after missing consensus estimates on non-GAAP earnings for the first quarter of fiscal 2019 by 11 cents. It posted $1.22 per diluted share, a 2.5% increase from the prior-year quarter.


The Mooresville, North Carolina-based retailer also recorded GAAP earnings of $1.31 per share, which were up 10.1%, but lagging consensus estimates by 1 cent.

Revenue of $17.74 billion grew 2.2% from the prior-year quarter, beating expectations by $90 million. Lowe's Companies saw comparable-store sales increase 3.5% and the U.S. home improvement business grow 4.2%.

The retailer operated a total of 2,002 stores in the first quarter of fiscal 2019 versus 2,015 stores in the final quarter of fiscal 2018 and compared to 2,154 stores in the first quarter of fiscal 2018. Also, the square feet of retail selling space fell 0.3% to 208.8 million in the first quarter of fiscal 2019 compared to 209.5 million in the fourth quarter of fiscal 2018 and was 2.9% lower than 215.1 million in the same quarter of fiscal 2018. Store count and square feet declined due to the exit of retail operations in Mexico.

Further, Lowe's Companies repurchased $818 million of common stock and paid $385 million in dividends during the quarter.

For full fiscal 2019, Lowe's Companies expects approximately 2% increase in total sales and about 3% growth in comparable-store sales. It estimates 310 basis points of growth in operating margin. The company also guided for earnings of $5.54 to $5.74 per diluted share and for adjusted earnings of $5.45 to $5.65 per diluted share. Analysts forecast earnings of $6.05 per diluted share. The tax rate is anticipated at approximately 24%.

The stock had a market capitalization of $77.95 billion at close on Wednesday. Lowe's Companies has risen 2% over the past 52 weeks but following Wednesday's flop the share price is now below the 200, 100 and 50-day simple moving average lines. The closing price on Wednesday was 15.5% above the 52-week low of $84.75 and 20.8% from the 52-week high of $118.23.

The 14-day relative strength index of 29 suggests the stock has significantly bottomed, approaching oversold levels.

Wall Street issued an overweight recommendation rating for shares of Lowe's Companies Inc., meaning it expects the stock to outperform either the industry or the overall market with an average target price of $118.29, which is 21% higher than the share price at close on Wednesday.

L Brands Inc. (LB) shares soared 13.72% to $24.45 in after-hours trading on Wednesday. After the closing bell, the apparel stores company posted first-quarter GAAP earnings of 14 cents per share, 17.6% lower year-over-year and versus estimates of no earnings. The company said that earnings were driven by the Bath & Body Works segment.

Revenue of $2.63 billion, which was flat year-over-year, beat expectations by $70 million. Comparable sales were also flat.

By segment, Victoria's Secret's comparable sales decreased 5% in the first quarter of fiscal 2019 versus 1% increase in the first quarter of fiscal 2018. Bath & Body Works' comparable sales increased 18% in the first quarter of fiscal 2019 compared to 8% increase in the first quarter of fiscal 2018.

The Columbus, Ohio-based retailer expects earnings per share to range between 15 and 20 cents for the second quarter versus a consensus of 23 cents. For full fiscal 2019, it guided for earnings of $2.30 to $2.60 per share versus a previous range of $2.20 to $2.60 and compared to a consensus of $2.39.

The stock had a market capitalization of $5.92 billion at close on Wednesday. L Brands Inc.'s share price has fallen 39% over the past year to below the 200, 100 and 50-day simple moving average lines. The closing price on Wednesday was slightly above the 52-week low of $21.47 and 77.4% from the 52-week high of $38.14.

The 14-day relative strength index of 27 indicates the stock is near oversold levels.

Wall Street issued a hold recommendation rating for shares of L Brands Inc. with an average target price of $29.55, or 37.4% higher than the share price at close on Wednesday.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.