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Lowe's Companies Soars After the Release of 2nd-Quarter Results

Shares of Lowe's Companies Inc. (NYSE:LOW) soared 8.45% to $106.14 in premarket trading on Wednesday after announcing second-quarter results.

The company posted earnings of $2.14 per share on $21 billion in revenue, reflecting 0.5% growth from the prior-year quarter.

Earnings beat consensus estimates by 12 cents, and revenue surpassed expectations by $30 million.

The Mooresville, North Carolina-based retailer saw comparable-store sales increase 2.3% and the U.S. home improvement business grow 3.2%.

Operating margin rate improved 98 basis points to 11.34% of total sales. Merchandise inventory grew 15.5% to $13.73 billion.

Lowe's Companies served its shareholders fresh figures about store count and square feet, which were influenced by the exit of retail operations in Mexico.

The company operated a total of 2,003 stores in the second quarter of fiscal 2019 versus 2,002 stores in the first quarter of fiscal 2019 and compared to 2,155 stores in the second quarter of fiscal 2018.

The square feet of retail selling space was 208.8 million in the second quarter of fiscal 2019, flat compared to the previous quarter and down 3% from 215.3 million in the prior fiscal year quarter.

Moreover, Lowe's Companies spent $1.96 billion to retire shares of its own common stock and allocated $382 million to dividends payment during the quarter.

"We capitalized on spring demand, strong holiday event execution and growth in Paint and our Pro business to deliver strong second-quarter results. Despite lumber deflation and difficult weather, we are pleased that we delivered positive comparable sales in all 15 geographic regions of the U.S. This is a reflection of a solid macroeconomic backdrop and continued momentum executing our retail fundamentals framework," Lowe's President and CEO Marvin R. Ellison said.

For full fiscal 2019, Lowe's Companies expects total sales will grow 2%, same-store sales will increase 3%, and operating margin will be 310 to 340 basis points higher compared to full fiscal 2018.

Further, the retailer guided for a tax rate of approximately 24% and for earnings of $5.54 to $5.74 per diluted share compared to analysts' forecast of $5.57 per diluted share.

Lowe's Companies' share price has climbed 6% so far this year to close at $97.87 on Tuesday, but it is still below the 120-, 70- and 20-day simple moving average lines. The stock has a market capitalization of $76.62 billion and a 52-week range of $84.75 to $118.23.

The 14-day relative strength index of 47 suggests the stock is neither overbought nor oversold.

Wall Street issued an overweight recommendation rating for shares of Lowe's Companies Inc., with an average target price of $113.86, reflecting 15.6% upside from the share price at close on Tuesday.

During the quarter ended June 30, Ken Fisher increased its stake by 3.97% to 61,390 shares, Robert Olstein raised his holding by 13.33% to 51,000 shares and Mario Gabelli added 6.03% to his ownership to 20,172 shares.

Third Avenue Management reduced its holding by 15.84% to 232,402 shares, Bill Ackman reduced his holding by 4.45% to 8,900,535 shares, and Joel Greenblatt reduced his stake by 5.49% to 124,119 shares.

Further, Ron Baron reduced his holding by 89.19% to 19,007 shares and Barrow, Hanley, Mewhinney & Strauss reduced its ownership by 2.77% to 14,232,631 shares.

Disclosure: I have no positions in any securities mentioned.

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