Lowe’s Outpaces Zacks Estimate – Analyst Blog

Lowe’s Companies Inc. (LOW), the world’s second largest home improvement retailer, recently posted better-than-expected first-quarter 2010 results, showing signs of improvement with consumers willing to spend on remodeling projects and big ticket items.

 

The quarterly earnings of 34 cents a share came ahead of the Zacks Consensus Estimate of 31 cents, and climbed 6.3% from 32 cents posted in the prior-year quarter. Lowe’s said that it now expects second-quarter 2010 earnings in the range of 57 cents to 59 cents a share, and fiscal year 2010 earnings between $1.37 and $1.47 per share.

 

The company’s second-quarter 2010 guidance fell short of the current Zacks Consensus Estimate of 62 cents a share. The stock fell $1.12 or 4.3% to $24.95 in pre-market trading on modest outlook despite stronger-than-expected results.

 

Net sales for the quarter rose 4.7% year-over-year to $12,388 million, after increasing 1.8% in fourth-quarter 2009. Management expects sales to increase between 5% and 7% in the second-quarter and fiscal year 2010.

 

Despite an increase of 5.2% in cost of sales, gross profit climbed 3.9% to $8,030 million on the heels of top-line growth, whereas gross margin contracted 28 basis points to 35.2% during the quarter.

 

Comparable-store sales also revived during the quarter. After falling 1.6% in fourth-quarter 2009, comps rose 2.4% in the quarter under review. Lowe’s expects comps to grow between 2% to 4% in the second-quarter and fiscal year 2010.

 

Home improvement retailers have long been grappling with the housing slump and economic downturn, but now things appear to be stabilizing.

 

During the quarter, Lowe’s opened 11 stores. The company expects to open 4 new stores in the second-quarter of 2010 and a total of 40 to 45 stores in fiscal year 2010.

 

Lowe’s ended the quarter with cash and cash equivalents of $2,677 million, total long-term debt of $6,067 million and shareholders’ equity of $19,019 million.