Lowe's (LOW) Likely To Beat On Q1 Earnings: Stock To Gain?

Lowe's Companies Inc. (NYSE:LOW) is slated to report first-quarter fiscal 2016 results on May 18, before the market opens. The big question facing investors now is, whether the company will be able to deliver a positive earnings surprise in the quarter to be reported.

In the preceding quarter, the company’s earnings came in line with the Zacks Consensus Estimate. Notably, the company surpassed the Zacks Consensus Estimate in two of the last four quarters, with an average earnings miss of 1.3%. Let’s see how things are shaping up for this announcement.

Likely Earnings Beat in Cards

Our proven model shows that Lowe's is likely to beat earnings estimates this quarter. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. The Most Accurate estimate stands at 86 cents and the Zacks Consensus Estimate is pegged at 84 cents. So the ensuing +2.38% ESP and the company’s Zacks Rank #2 makes us reasonably confident of an earnings beat.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Influencing this Quarter

We believe that an improving job scenario, gradual recovery in the housing market and merchandising initiatives should benefit Lowe’s. In addition, the company’s Canadian business has been performing quite well, with strong comps growth (in local currency) over the last three years. Moreover, the company has acquired 12 former Target locations across Canada, which we believe, will drive the company’s revenue higher.

Stocks Poised to Beat Earnings Estimates

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

The Home Depot, Inc. (NYSE:HD) has an Earnings ESP of +1.50% and a Zacks Rank #2.

Best Buy Co., Inc. (NYSE:BBY) has an Earnings ESP of +2.94% and a Zacks Rank #2.

DSW Inc. (NYSE:DSW) has an Earnings ESP of +2.17% and a Zacks Rank #3.