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Lowe maintains Hold rating on Q1 exceeding expectations

EditorNatashya Angelica
Published 05/22/2024, 11:34 AM
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On Wednesday, TD Cowen sustained its hold rating on shares of Lowe's Companies Inc. (NYSE: NYSE:LOW) with a steady stock price target of $240.00. The firm's stance comes after Lowe's reported first-quarter comparable sales that exceeded expectations, particularly noting strong performance in the Pro customer segment. TD Cowen anticipates this trend to persist, outperforming the do-it-yourself (DIY) sector.

While the second-quarter projections are slightly below the company's guidance, TD Cowen holds a more optimistic view for the overall trajectory of the year. Despite the macroeconomic challenges that continue to pose risks, the current trends are seen as relatively stable. Still, Lowe's experienced an unexpected gross margin shortfall, complicating the company's ability to meet its target of flat year-over-year gross margins.

The analyst from TD Cowen highlighted the positive aspects of Lowe's first-quarter performance, specifically the robust comparable sales driven by the Pro customer base. This segment is anticipated to keep leading the charge in terms of growth. On the other hand, the second quarter is modeled to fall short of the company's own expectations, yet the outlook for the remainder of the year is viewed with cautious optimism.

The report pointed out that while the broader economic environment remains a concern, the signs within the company suggest a level of stability. Nevertheless, the surprise dip in gross margins represents a significant challenge for Lowe's. It raises the difficulty for the company in achieving its guidance of maintaining gross margins comparable to the previous year.

In conclusion, TD Cowen reaffirmed its neutral position on Lowe's stock, expressing a balanced perspective on the company's performance and prospects. The $240.00 stock price target remains unchanged, reflecting the firm's careful evaluation of the home improvement retailer's financials and market position.

InvestingPro Insights

Lowe's Companies Inc. (NYSE: LOW) has shown resilience with a market capitalization of $127.62 billion, underpinned by a solid track record of increasing dividend payments for 54 consecutive years.

The company's P/E ratio stands at 18.37, indicating a reasonable valuation when aligned with near-term earnings growth, as reflected in the adjusted P/E ratio of 17.69 for the last twelve months as of Q1 2025. This is further supported by a PEG ratio of 0.86 for the same period, suggesting potential for earnings growth relative to its share price.

Investors may also find reassurance in Lowe's low price volatility and its position as a prominent player in the Specialty Retail industry. With analysts forecasting profitability for the current year and a demonstrated profit over the last twelve months, the company's financial health remains robust.

Moreover, Lowe's has a strong return history, with a notable 12.96% one-year price total return as of the most recent data. For those interested in further insights, there are over 9 additional InvestingPro Tips available, which can be explored further at Investing.com. To access these insights, use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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