U.S. Markets close in 1 hr 12 mins

Lowe's Leaves Its 2017 Outlook Unchanged

Demitrios Kalogeropoulos, The Motley Fool

Lowe's (NYSE: LOW) this week announced earnings results that included a sharp sales jump as hurricane recovery efforts lifted demand for home improvement products. Yet the retailer couldn't keep up with the growth pace and profitability that Home Depot (NYSE: HD) revealed earlier in the month. Meanwhile, Lowe's left its full-year operating outlook unchanged despite the surprisingly strong third quarter.

More on that forecast in a moment. First, here's how the headline results stacked up against the prior-year period:

 Metric

Q3 2017

Q3 2016

Year-Over-Year Growth

Revenue

$16.77 billion

$15.74 billion

6.5%

Net income

$872 million

$379 million

130%

Earnings per share

$1.05

$0.43

144%

Data source: Lowe's financial filings.

What happened with Lowe's this quarter?

Lowe's sales growth pace improved for the third straight quarter thanks to a short-term bump from natural disasters and management's successful initiatives aimed at driving customer traffic. Reported profits more than doubled, but that spike was powered by one-time charges that reduced earnings in the prior-year period. Adjusted profits rose by a still healthy 17%.

An empty cart sits in a home improvement store aisle.

Image source: Getty Images.

The key highlights of the quarter:

  • Comparable-store sales were up 5.7% versus a 4.5% increase in the prior quarter. That result kept the retailer far behind Home Depot, which announced a 6.9% third-quarter comps spike a week ago.
  • Overall sales rose 6.5% as the company added 25 new locations to its base over the past year.
  • Gross profit ticked down to 34% of sales from 34.35%, likely because the $200 million of hurricane sales Lowe's booked during the quarter occurred at lower profit margins.
  • Operating margin soared to 9.2% of sales from 5.97%, but the prior-year figure was held down due to one-time charges. Lowe's remains less profitable than Home Depot, which has an operating margin of 15%.
  • Lowe's returned $844 million to shareholders through dividends and stock repurchases.

What management had to say

Lowe's executives highlighted several wins they managed despite the logistical challenges posed by a string of natural disasters impacting parts of the U.S. and Mexico. "We drove traffic in-store and online," CEO Robert Niblock said in a press release, "with compelling messaging and integrated customer experiences." Lowe's didn't release specific traffic numbers, but management's comments suggest the company saw modest growth on this metric after shrinking slightly through the first half of 2017.

"I am also pleased with the progress we've made to enhance our product and service offering for the Pro customer," Niblock continued. That market niche grew at a faster pace than the company average, management noted.

Looking forward

Lowe's left all its full-year forecasts unchanged despite the hurricane-fueled sales increase. Comps are still projected to rise by about 3.5% for the full year as earnings come in at between $4.20 and $4.30 per share. Home Depot, on the other hand, took the opportunity last week to raise its comps forecast by a full percentage point and now believes it will grow at a 6.5% pace for the year. Home Depot also raised its profit outlook and predicted that recovery efforts will lift results through at least the first half of 2018.

Speaking about Lowe's guidance, CFO Marshall Croom said during the conference call with analysts:

We think that our guidance for the quarter [and] for the year is appropriate and balanced as we look to invest in running the business and continue to invest in our ongoing capabilities. We are confident in our ability to drive traffic in Q4. We do expect some benefit from the hurricanes as we move into Q4 and into 2018. ... But again, recognize Q4, we have tough comparisons to last year. So as we mentioned, weather can be kind of [a] wildcard in the fourth quarter. ... As far as where we are quarter-to-date, we're just slightly ahead of our expectations for the quarter.


More From The Motley Fool

Demitrios Kalogeropoulos owns shares of Home Depot. The Motley Fool has the following options: short January 2018 $170 calls on Home Depot and long January 2020 $110 calls on Home Depot. The Motley Fool recommends Home Depot and Lowe's. The Motley Fool has a disclosure policy.

  • Finance
    Barrons.com

    A Facebook Bear Finds More Reasons to Growl

    Pivotal Research Group’s Brian Wieser was one of the earlier analysts to be downbeat on (FB) shares. “New problems at Facebook representative of systemic issues came to light in recent days,” Pivotal analyst Brian Wieser wrote on Wednesday. “We’re not doubting they can’t be fixed, but the fact that problems keep emerging reinforces our view that the company is not as in control of its business as it needs to be.

  • Ken Langone: 'Who the hell in their right frame of mind would be buying bonds now?'
    Business
    Yahoo Finance

    Ken Langone: 'Who the hell in their right frame of mind would be buying bonds now?'

    Billionaire investor and philanthropist Ken Langone, the founder of The Home Depot (HD) and chairman of Invemed Associates, argued that there’s some “big time” structural problems in the market right now. “A big fear to me is who the hell in their right frame of mind would be buying bonds now?

  • Business
    Reuters

    Exclusive: Express Scripts covers Amgen, Lilly migraine drugs, excludes Teva

    Express Scripts Holding Co, one of the largest U.S. prescription benefits managers, will cover new migraine drugs from Eli Lilly and Amgen Inc, but exclude a rival medication from Teva Pharmaceutical Industries Ltd after price negotiations with all three manufacturers. The decision represents a setback for Israel-based Teva , which is in the midst of a corporate restructuring and had hoped to capture a sizable share of the multibillion-dollar migraine market. Express Scripts is also taking steps to limit use of the Amgen and Lilly migraine drugs to patients it says are most likely to benefit from them.

  • A former GE exec who trained new managers found that almost all of them were making the same mistake
    Business
    Business Insider

    A former GE exec who trained new managers found that almost all of them were making the same mistake

    Beth Comstock is the former vice chair of General Electric. Comstock would hand out "permission slips" authorizing employees to take risks — but she also said it's important for people to stop hiding behind their excuses. Beth Comstock doesn't tolerate excuses.

  • Tilray CEO: I anticipate future conversations with alcoho...
    Business
    CNBC Videos

    Tilray CEO: I anticipate future conversations with alcoho...

    Tilray CEO Brendan Kennedy sits down with CNBC's 'Squawk on the Street' team to discuss Tilray's future after Canada legalized recreational marijuana on Wednesday.

  • Advanced Micro Devices (AMD) Q3 Earnings Preview: Here's What to Look Out For
    Business
    Zacks

    Advanced Micro Devices (AMD) Q3 Earnings Preview: Here's What to Look Out For

    Advanced Micro Devices (AMD) is expected to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended September 2018. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price. The earnings report, which is expected to be released on October 24, 2018, might help the stock move higher if these key numbers are better than expectations.

  • 7 Stocks to Buy and Hold Through Any Market Selloff
    Business
    InvestorPlace

    7 Stocks to Buy and Hold Through Any Market Selloff

    Last week’s market collapse made headlines throughout the world. Since the sharp correction has negatively impacted virtually all investment sectors, you’re going to find discounted deals everywhere you look.

  • Steven Mnuchin, Who Sat on Sears' Board for Years, Could Impact the Pensions of Thousands of Workers
    Business
    Fortune

    Steven Mnuchin, Who Sat on Sears' Board for Years, Could Impact the Pensions of Thousands of Workers

    Long before he was Secretary of the Treasury, Steven Mnuchin was a student at Yale University. One of those was Eddie Lampert. Lampert, of course, is the recently departed CEO of Sears Holdings, which filed for Chapter 11 bankruptcy Monday.

  • Pfizer outlines early retirement program ahead of layoffs
    Business
    American City Business Journals

    Pfizer outlines early retirement program ahead of layoffs

    Pfizer Inc. is offering early retirement to U.S. workers ahead of layoffs early next year. The headcount reduction plan is part of a company-wide restructuring and will likely affect non-union workers. Pfizer told employees: The pharmaceutical giant is offering severance packages that pay a base salary of 12 weeks, plus three weeks of salary for every year of work (up to 104 weeks).

  • Finance
    CNBC

    Berkshire Hathaway shares look really cheap using Warren Buffett's own method of valuing stocks

    Companies pay investors dividends but they also retain some of their earnings. Over time, companies invest these retained earnings at a higher rate of return and that ultimately boosts their share prices, benefiting their investors. J. P. Morgan analyst Sarah DeWitt calculates that Berkshire's share of undistributed earnings from its stock portfolio is $12 billion, or about $5.19 per Berkshire B share.

  • Boeing delivers first 737 Max 8 BBJ and unveils Max 7 luxury interior (Photos)
    Business
    American City Business Journals

    Boeing delivers first 737 Max 8 BBJ and unveils Max 7 luxury interior (Photos)

    Boeing has delivered its very first 737 Max 8 business jet to a paying customer. It's the first of 20 BBJ Max jets that buyers from around the world have ordered from the Chicago-based jetmaker since they went on sale. Boeing spokesman Dmitry Krol declined to identify the buyer of the jet, which is the second of its kind made at Boeing's Renton 737 factory.

  • Why Marijuana Stocks Cronos Group, Canopy Growth, and Tilray Jumped Today
    Business
    Motley Fool

    Why Marijuana Stocks Cronos Group, Canopy Growth, and Tilray Jumped Today

    The stock market pulled back on Monday, with major benchmarks failing to build on the positive momentum from last Friday. Cronos Group (NASDAQ: CRON), Canopy Growth (NYSE: CGC), and Tilray (NASDAQ: TLRY) were among the best performers. All three of these stocks have something in common: They all stand to benefit from Wednesday's effective date for legal sales of recreational cannabis product in Canada.

  • Business
    Benzinga

    Bernstein Initiates On Tobacco Stocks: Philip Morris 'Leads The Way In The New Nicotine World'

    Tobacco stocks are facing an uphill battle when it comes to regulation and public perception, but one Wall Street analyst says tobacco companies have a long track record of success for investors. The Analyst Bernstein analyst Callum Elliott has initiated

  • Netflix is ditching freeloaders from subscriber forecasts after volatile stock moves
    Business
    MarketWatch

    Netflix is ditching freeloaders from subscriber forecasts after volatile stock moves

    After two consecutive off-the-mark quarters, falling short of its own forecasts for subscriber growth, Netflix Inc. hopes to put an end to the big swings in its stock price with some changes to its accounting. Three months ago, Netflix reported weaker-than-expected subscriber growth, sending its stock tumbling about 12% in the next trading day. From last quarter: Is Netflix stock falling down a mountain, or just tripping over a molehill?

  • ‘Mr. Wonderful’ staying on sidelines as legal pot comes to Canada
    Politics
    Yahoo Finance Video

    ‘Mr. Wonderful’ staying on sidelines as legal pot comes to Canada

    Recreational marijuana is now legal in Canada, but one prominent investor is staying on the sidelines. ‘Mr. Wonderful,’ Kevin O’Leary, says he won’t be putting his money into legal pot, for now. He spoke with Yahoo Finance’s Alexis Christoforous.

  • Could Enbridge Inc. Be a Millionaire-Maker Stock?
    Business
    Motley Fool

    Could Enbridge Inc. Be a Millionaire-Maker Stock?

    Enbridge (NYSE: ENB) has made its investors lots of money over the years. To put that into perspective, if an investor had bought $10,000 worth of Enbridge's stock 20 years ago, it would be worth about $116,000 today assuming they reinvested their dividends. While Enbridge has done an excellent job creating wealth for investors in the past, it faces an uphill battle in making them millionaires in the future.

  • Here's the Average Social Security Benefit for 2019
    Business
    Motley Fool

    Here's the Average Social Security Benefit for 2019

    Millions of seniors collect Social Security, and without it, they'd be underwater on their bills. At present, the average retiree gets $1,422 a month in Social Security benefits. There's a world of misinformation surrounding Social Security, and perhaps one of the most detrimental myths out there is the notion that the program is enough to sustain seniors by itself.

  • Finance
    TheStreet.com

    General Electric Rises on Reported Iraq Power-Generation Deal

    for a multi-billion-dollar deal to supply power to Iraq. Munich-based Siemens had been close to securing a contract to supply 11 gigawatts of power-generation equipment to Iraq, a deal worth about $15 billion, but then the Trump administration intervened on behalf of GE, the Financial Times reported, citing unnamed people familiar with the matter. The Trump administration reportedly pressured the Iraqi government, and now "GE is expected to take a substantial share of the sale," the Financial Times said.

  • Business
    Benzinga

    Kinder Morgan's Q3 Earnings Preview

    Kinder Morgan (NYSE: KMI) will be releasing its next round of earnings Wednesday. For all of the relevant information, here is your guide for the Q3 earnings announcement. Earnings and Revenue Analysts expect Kinder Morgan earnings of 21 cents per share

  • Better Buy: The Home Depot, Inc. vs. Lowe's
    Business
    Motley Fool

    Better Buy: The Home Depot, Inc. vs. Lowe's

    Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) have helped countless homeowners increase the value of their homes. They've also made many investors rich. With their shares having soared 879% and 484%, respectively, over the past decade, Home Depot and Lowe

  • ‘Wake ’n Bake,’ Plunging Stocks Greet Canada’s Legal Pot Debut
    World
    Bloomberg

    ‘Wake ’n Bake,’ Plunging Stocks Greet Canada’s Legal Pot Debut

    Stores in St. John’s, Newfoundland were the first to sell recreational cannabis, followed by more than 100 outlets and websites opening across the country of 37 million people. “I’m super happy, this is an historic day for Canadians and for the world because we’re really setting a precedent here," said Isaac Langille outside a store in Halifax, where he bought the legal limit of 30 grams, spending C$344 ($264) on products from Aphria Inc. and Organigram Holdings Inc.

  • The Zacks Analyst Blog Highlights: Altria, Coca-Cola, PepsiCo, Constellation and Canopy Growth
    Business
    Zacks

    The Zacks Analyst Blog Highlights: Altria, Coca-Cola, PepsiCo, Constellation and Canopy Growth

    Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Altria Group Inc. MO, Coca-Cola Company KO, PepsiCo PEP, Constellation Brands STZ and Canopy Growth Corp. CGC. Altria Group Inc., America’s leading cigarette manufacturer, is in talks with Canadian cannabis producer Aphria Inc. to buy a stake in it, The Globe & Mail reported last week.

  • AT&T (T) Q3 Earnings Preview: How Are Events Shaping Up?
    Finance
    Zacks

    AT&T (T) Q3 Earnings Preview: How Are Events Shaping Up?

    The market expects AT&T (T) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended September 2018. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates. The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on October 24.

  • Marijuana Stocks to Watch in October -- and Into 2019
    Business
    Motley Fool

    Marijuana Stocks to Watch in October -- and Into 2019

    Tomorrow, Wednesday, Oct. 17, Canada will become the first industrialized county in the world where marijuana is legal for adult recreational use -- and only the second country, along with Uruguay, where such use is legal.  Not only does this open up

  • Analysts Give Philip Morris a ‘Buy’ Rating before Its Q3 Earnings
    Business
    Market Realist

    Analysts Give Philip Morris a ‘Buy’ Rating before Its Q3 Earnings

    Can Philip Morris Outperform Analysts’ Expectations in Q3 2018? Of the 19 analysts that follow Philip Morris International (PM), 52.6% recommend a “buy,” 42.1% recommend a “hold,” and 5.3% recommend a “sell.” On average, analysts have set a price target of $91.69, which represents a potential return of 11.4% from its current stock price of $82.31. Berenberg cut PM’s target price from $85.00 to $84.00 on October 1.