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Earnings Estimates Moving Higher for Lowe's (LOW): Time to Buy?

Zacks Equity Research

Investors might want to bet on Lowe's (LOW), as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.

The upward trend in estimate revisions for this home improvement retailer reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For Lowe's, there has been strong agreement among the covering analysts in raising earnings estimates, which has helped push consensus estimates considerably higher for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $2.38 per share for the current quarter, which represents a year-over-year change of +10.7%.

Over the last 30 days, eight estimates have moved higher for Lowe's while three have gone lower. As a result, the Zacks Consensus Estimate has increased 13.45%.

Current-Year Estimate Revisions

For the full year, the company is expected to earn $6.49 per share, representing a year-over-year change of +13.46%.

The revisions trend for the current year also appears quite promising for Lowe's, with 11 estimates moving higher over the past month compared to two negative revisions. The consensus estimate has also received a boost over this time frame, increasing 10.63%.

Favorable Zacks Rank

The promising estimate revisions have helped Lowe's earn a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on Lowe's because of its solid estimate revisions, as evident from the stock's 20.6% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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