Lowe’s Companies, Inc. (LOW) recently posted better-than-expected fourth-quarter 2010 results. The quarterly earnings of 21 cents a share beat the Zacks Consensus Estimate of 18 cents and soared 50% from 14 cents earned in the prior-year quarter. The quarterly earnings also exceeded the company’s guidance range of 16 cents to 19 cents a share.
The Zacks Consensus Estimate rose by a penny prior to the earnings release with 5 out of 26 analysts covering the stock revising their estimates upwards and none lowering their projections in the last 30 days.
Lowe’s said that it now expects first-quarter 2011 earnings in the range of 34 cents to 38 cents a share, and fiscal 2011 earnings between $1.60 and $1.72. The current Zacks Consensus Estimates of 38 cents and $1.66 per share for the first quarter and fiscal 2011, respectively, dovetail with the company’s projections.
We witness that growth in the top-line has accelerated. After registering a growth of 1.9% in third-quarter 2010, net sales for the fourth quarter rose 3.1% to $10,480 million, which also came ahead of the Zacks Consensus Estimate of $10,466 million. Lowe’s indicated that it expects to gain market share during fiscal 2011.
Although the economy is showing signs of a revival, we believe that spending on big remodeling projects will likely remain under pressure until the housing market stabilizes, inventory levels normalize and consumer-spending rebounds.
Management now expects sales to increase approximately 2% and 5% in the first quarter and fiscal 2011, respectively.
The rate of growth in comparable-store sales also increased during the quarter under review. After increasing 0.2% in the third quarter of 2010, comparable-store sales grew by 1.1% in the fourth quarter. Lowe’s expects comparable-store sales to remain flat in the first quarter and to increase between 1% and 2% in fiscal 2011.
Lowe’s, which competes with The Home Depot, Inc. (HD), indicated that gross profit climbed 4.8% to $3,726 million, whereas gross margin expanded 60 basis points to 35.6% during the quarter. The growth in gross profit was aided by a jump in the top line that shaved off an increase of 2.1% in cost of sales.
During the quarter, Lowe’s opened 17 stores and shut 2 stores. The company expects to open 25 to 30 new stores during fiscal 2011. The company currently operates 1,749 stores.
The world’s second largest home improvement retailer, Lowe’s, ended fiscal 2010 with cash and cash equivalents of $652 million, total long-term debt of $6,573 million and shareholders’ equity of $18,112 million.
Currently, we have a long-term Neutral rating on the stock. However, Lowe’s holds the Zacks #2 Rank, which translates into a short-term Buy rating.
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