Categories Analysis, Industrials

Home Depot (HD) delivered a mixed Q1, what can we expect from Lowe’s (LOW)?

The consensus estimate is for EPS of $3.46 in Q1 2023

Shares of Lowe’s Companies, Inc. (NYSE: LOW) were down 1% on Tuesday. The stock has dropped 6% over the past three months. Lowe’s rival Home Depot (NYSE: HD) delivered mixed results for the first quarter of 2023 today while the former is scheduled to report its Q1 2023 earnings results on Tuesday, May 23, before market open. Here’s a look at what to expect from the earnings report:

Revenue

Analysts are projecting revenue of $21.6 billion for Lowe’s for the first quarter of 2023, which represents an 8% decline from the same period last year. In the fourth quarter of 2022, sales increased 5% year-over-year to $22.4 billion.

Earnings

The consensus estimate is for EPS of $3.46 in Q1 2023, which compares to EPS of $3.51 reported in Q1 2022. In Q4 2022, adjusted EPS increased 28% YoY to $2.28.

Points to note

On its Q4 conference call, Lowe’s had predicted a slight decline in the home improvement market in 2023 due to inflationary pressures. Its peer Home Depot had also anticipated a moderation in the home improvement sector but the environment turned out to be more challenging than expected which in turn impacted HD’s Q1 results. It is likely that Lowe’s Q1 results could also be impacted by this trend.

Lowe’s expects the Pro segment sales to surpass the DIY segment sales in 2023. At the time of its Q4 report, Lowe’s said its Pro customers appeared to have a healthy backlog for this year compared to the last. It remains to be seen how the current environment has affected both the Pro and DIY segments.

In Q4, Lowe’s saw Pro strength in categories like building materials, rough plumbing and millwork. Appliances grew across both the Pro and DIY segments during the quarter and the company said it is gaining market share in this category.

Lowe’s has been making progress with its market delivery model for appliances and other heavy products. Under this model, big and bulky products move from the company’s supply chain directly to the homes of customers, replacing its store delivery model. Lowe’s is optimistic that this model will help drive growth in appliances and other bulky products like grills.

Moving to outlook, Home Depot cut its guidance for the full year of 2023 due to a higher-than-expected drop in demand and the prevailing uncertainty around it as well as the negative impact of lumber deflation and weather on Q1 sales. It remains to be seen if Lowe’s is forced to go down the same path as its competitor.

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