For traders seeking constant thrills, Lowe’s (NYSE:LOW) is probably not the first name that comes to mind. Yet, with an earnings report coming up on Aug. 19, the LOW stock price could potentially fall and fast.
That being said, thrill seeking shouldn’t be the main reason to own LOW shares. You have to believe that Lowe’s is a rock-solid company that’s trading at a reasonable price. The stock’s price increase over the past few months might make it harder to convince value investors that there’s a real bargain here.
Yet, even at an elevated share price, investors can still find reasons to hold Lowe’s stock now. Americans’ penchant for home-improvement projects could translate to sizable profits for Lowe’s and, just as importantly, for the company’s patient shareholders.
A Closer Look at LOW Stock
As I alluded to earlier, Lowe’s stock has undergone a bull run recently. This could be cut short by the upcoming earnings-data release. For the time being, though, the bulls are fully in control of the price action.
LOW is one of those stocks that has survived through multiple recessions and paid a consistent dividend along the way. Would you believe that LOW shares cost less than $1 a piece back in the 1980’s? In early August of 2020 they’re above $150, which is proof positive that the demand for home-improvement materials never really goes away.
The stock’s recovery for the novel-coronavirus crisis demonstrates that LOW is among an elite class of recession-resistant investments. In an odd coincidence, the stock price bottomed out this year at a 52-week low of exactly $60.
Don’t expect to see that price again anytime soon. Instead, it’s best to focus on the company itself and consider whether the home-improvement niche will remain lucrative going forward.
High Hopes for Lowe’s
One way to measure the future earnings prospects of a company is through analysts’ revisions. Specifically, many analysts have raised their earnings-per-share estimates for a company, that’s probably a good sign.
If we’re using that particular criterion, then Lowe’s passes with flying colors. Astonishingly, in three months’ time analysts released 47 upward fiscal-year earnings revisions for Lowe’s.
That’s a whole lot of upward-revision activity for a single company in a short span of time. And keep in mind, we’re not talking about price-target increases, which would be necessary as the share price keeps rising.
Rather, we’re talking about earnings estimates. So overall, analysts are evidently quite bullish on the company’s ability to generate profits. That’s understandable as the company posted outstanding fiscal data during the previous earnings report.
Strong Data for a Strong Company
To be more specific, during its first fiscal quarter Lowe’s reported earnings of $1.77 per share and $19.68 billion in revenues. That beat the analysts’ estimates of $1.32 per share in earnings and $18.33 billion in revenues.
Will Lowe’s post another earnings beat in its upcoming data release? Only time will tell, but there’s a robust market for what Lowe’s has to offer.
America isn’t completely on lockdown nowadays, but there’s still social pressure to stay at home as much as possible. Thus, Gordon Haskett analyst Chuck Grom concludes that “consumers’ willingness to invest in their home via DIY projects will continue for many quarters.”
Grom is uniquely qualified to assert this as his firm’s research suggested that even while U.S. states are reopening, shoppers are still interested in home-improvement and do-it-yourself projects.
It makes perfect sense, then, that Grom upgraded his rating on LOW stock from “hold” to “buy.” As long as people continue to find ways to fix up their homes, Lowe’s business should have no serious threats on the horizon.
The Bottom Line
Are shares in LOW really expensive? All things considered, not really. Even after a big run-up in the price, the shares are still a bargain as the home-improvement market is showing no signs of slowing down anytime soon.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.