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Lowe's Earnings Improve Y/Y, Misses Est

Zacks Equity Research

Lowe’s Companies Inc.’s (LOW) reported earnings of 49 cents per share in the first quarter of fiscal 2013 surged approximately 14% from the comparable year-ago quarter’s earnings of 43 cents. However, quarterly earnings fell short of the Zacks Consensus Estimate of 51 cents per share.

This Zacks Rank #3 (Hold) stock, which competes with The Home Depot, Inc. (HD), witnessed a 0.5% decline in total revenue to $13,088 million. Moreover, reported revenue came in below the Zacks Consensus Estimate of $13,415 million. During the quarter, comparable-store sales declined 0.7% on a consolidated basis.

During the quarter, Lowe’s indoor categories witnessed a solid performance, while its outdoor categories business was hit by unfavorable weather conditions.

In dollar terms, gross profit inched down 0.7% year over year to $8,533 million. However, gross profit margin showed signs of improvement and increased marginally to 35.8% during the quarter, reflecting a decline in cost of sales as a percentage of revenues.

Other Financial Aspects

Lowe’s ended the quarter with cash and cash equivalents of $1,081 million, long-term debt of $9,026 million, and shareholders’ equity of $13,252 million, reflecting a debt-to-capitalization ratio of 40.5%.

During the quarter, the company repurchased $1.0 billion worth of its common stock and distributed $178 million in dividends.

Fiscal 2013 Outlook

The company reaffirmed its sales and earnings per share outlook for fiscal 2013. Lowe’s continues to expect sales to grow nearly 4% while comparable store sales to increase about 3.5%. Further, management still expects earnings of $2.05 per share in the fiscal.

The company projects earnings before interest and taxes (:EBIT) as a percentage of sales or operating margin to expand by 60 basis points year over year in fiscal 2013.

Moreover, the company plans to open 10 new stores during fiscal 2013. As of May 3, 2013, the company operated 1,755 locations in the United States, Canada and Mexico.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Zumiez Inc. (ZUMZ) with an Earnings ESP of +8.33% and a Zacks Rank #2 (Buy).

Foot Locker Inc. (FL) with an Earnings ESP of +2.30% and a Zacks Rank #2 (Buy).

Read the Full Research Report on HD

Read the Full Research Report on ZUMZ

Read the Full Research Report on LOW

Read the Full Research Report on FL

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