Today, Lowe’s (LOW), the nation’s second-largest home-improvement retailer — Home Depot (HD) is the largest — posted a 30% drop in quarterly profits. In Q3, profits fell to $344 million, or 23 cents per share, from $488 million, or 33 cents per share, a year earlier. Consensus Street estimates were for earnings of 24 cents per share.
To be sure, the Great Recession has certainly done a number on home-improvement retailers. Both Home Depot and Lowe’s have had tough recent quarters.
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In his statement accompanying the earnings release, Lowe’s Chief Executive Robert Niblock said, “The broad-based pressures of the macro environment are clearly evident in our sales, as consumers continue to delay large purchases until they feel better about the economic outlook.” Hey, I can’t argue much with that assessment, but the good news is Lowe’s expects a much better fourth quarter.
The company said it sees signs of improvement in Q4, with profits ranging from 9 cents and 13 cents per share. If Lowe’s were to come in at the upper-end of this forecast, it would beat the current Street estimate for a profit of 10 cents per share.
I think this forecast is very good news for the stock, especially because it represents a change from just a couple of months ago. In September, Lowe’s came out with an extremely cautious forecast for its next fiscal year. Now the company’s tune has become much more upbeat, and I suspect that’s why the shares opened higher in early Monday trade, despite the penny-per-share earnings miss.
If we look at the chart here of LOW, we can see that over the past two weeks the shares have bounced off their long-term, 200-day moving average (red line). They’ve also breached their short-term, 50-day moving average (blue line). The recent trading action in the stock is clearly bullish, and I wouldn’t be the least bit surprised to see LOW make new 52-week high later this week.
If you want to improve your portfolio returns, then think about doing so with this home-improvement retailer’s shares.
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