Lowe’s Cos. (NYSE: LOW) stock dipped more than 5 percent Wednesday morning after the company disappointed the market with its second quarter earnings report and lowered its full-year guidance. So far in 2017, Lowe’s has benefited from a boom in the home improvement industry, but the company’s latest numbers confirm that its business performance is still not on-par with rival Home Depot Inc ( HD).
Lowe’s reported adjusted earnings per share of $1.57 on revenue of $19.5 billion. Both numbers fell short of consensus analyst estimates for LOW stock, which called for $1.61 and $19.53 billion, respectively.
Looking ahead, Lowe’s says it is expecting full-year operating margins to increase between 80 and 100 basis points, down from a previous estimate of a 120 basis point increase. LOW also reduced its full-year EPS estimate by a dime to a new range between $4.20 and $4.30 per share. Analysts were expecting full-year EPS of $4.62.
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Despite the top- and bottom-line misses, same-store sales growth of 4.5 percent topped consensus forecasts of 4.3 percent. But while 4.5 percent same-store sales growth would be welcome news for most of the struggling U.S retail sector, it’s well short of HD’s impressive 6.3 percent growth in the same quarter.
“While our results were below our expectations in the first half of this year, the team remains focused on making the necessary investments to improve the customer experience and drive sales,” Lowe’s CEO Robert Niblock says.
According to the earnings statement, those investments will include “amplifying our consumer messaging and incremental customer-facing hours in our stores.”
Oppenheimer analyst Brian Nagel says all the moves Lowe’s is making are made with HD in mind.
“Lowe’s is a well-run company, but it’s not as well-run as Home Depot,” Nagel tells CNBC. “We see evidence of this a lot, almost quarter-in and quarter-out. I think to a certain extent the comments Lowe’s is making here are that we need to get better at service to compete better with our primary competitor, Home Depot.”
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Earlier this week, Credit Suisse analyst Seth Sigman said investors couldn’t go wrong with either of the home improvement giants and reiterated “outperform” ratings for both stocks.
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Lowe’s (LOW) Is Still Chasing Home Depot (HD) originally appeared on usnews.com
