Are Investors Optimistic About Lowe's (LOW) Q1 Earnings?

Lowe's Companies, Inc. (NYSE:LOW) is set to release first-quarter fiscal 2017 results on May 24. Investor focus will remain on whether this home improvement retailer manages to deliver a positive earnings surprise in the to-be-reported quarter. In the trailing four quarters, the company underperformed the Zacks Consensus Estimate by an average of 0.2%. However, in the final quarter of fiscal 2016, it posted positive earnings surprise of 8.9%. Let’s see how things are shaping up for this announcement.

Investors Seem Optimistic

Investors’ seem to be optimistic ahead of Lowe's earnings release. We observe that the stock has jumped roughly 1.6% in the past one month. In fact, the stock has increased approximately 11.5% in the past three months, while the Zacks categorized Building Product-Retail/Wholesale industry advanced 7.4%. The broader Retail-Wholesale sector of which both are a part has gained 7.2%.

Per the latest Earnings Preview report as of May 19, Retail-Wholesale sector is likely to witness earnings growth of 0.8% and revenue increase of 3.4%. Let’s take a closer look as to how Lowe's is expected to contribute to the sector’s performance.

The current Zacks Consensus Estimate for the first quarter of fiscal 2017 is $1.07, up about 23% from the year-ago period. We note that the Zacks Consensus Estimate has increased by a penny in the last seven days. Analysts polled by Zacks anticipate revenues of $17,037 million, reflecting an increase nearly 12% from the prior-year quarter.

Lowe's Companies, Inc. Price, Consensus and EPS Surprise

Lowe's Companies, Inc. Price, Consensus and EPS Surprise | Lowe's Companies, Inc. Quote

Factors at Play

An improving job picture, gradual recovery in the housing market and merchandising initiatives along with efforts to provide better omni-channel customer experience bode well for Lowe’s. It also remains well positioned to reap the benefits of strategic acquisitions done earlier, such as that of RONA. Recently, Lowe's acquired Maintenance Supply Headquarters, a distributor of maintenance, repair and operations products, for $512 million. However, cannibalization and stiff competition still remain threats.

What Does the Zacks Model Unveil?

Our proven model shows that Lowe's is likely to beat earnings estimates this quarter. A stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Lowe's has an Earnings ESP of +0.94% as the Most Accurate estimate stands at $1.08 and the Zacks Consensus Estimate is pegged lower at $1.07. So the ensuing positive Earnings ESP and a Zacks Rank #3 make us reasonably confident of an earnings beat.

Other Stocks with Favorable Combination

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

Best Buy Co., Inc. (NYSE:BBY) has an Earnings ESP of +10.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Burlington Stores, Inc. (NYSE:BURL) has an Earnings ESP of +2.86% and a Zacks Rank #2.

Ulta Beauty, Inc. (NASDAQ:ULTA) has an Earnings ESP of +0.56% and a Zacks Rank #2.

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