Wall Street has been bracing itself for lackluster news from economic bellwethers, but home improvement retailer Lowe’s (NYSE:LOW) just managed to delight analysts. The company saw a solid beat for its third quarter. Management also boosted its full-year 2022 outlook based on robust demand for home renovations and do-it-yourself projects. As a result, LOW stock is popping more than 4% as of this writing.
First, the Q3 print made everyone take notice. On the top line, Lowe’s generated revenue of $23.5 billion, edging past the consensus target of $23.1 billion. On the bottom line, EPS hit $3.27 as well. This figure also exceeded the $3.09 per share analysts had expected. Notably, same-store sales rose 2.2% in Q3 while U.S. same-store sales gained 3%, per a Barron’s report.
Better yet, Lowe’s management now “expects full-year adjusted earnings of $13.65 to $13.80 a share, higher than its previous estimate of $13.10 to $13.60 a share.” In addition, Barron’s reports that the retailer “sees full-year sales of about $97 billion to $98 billion” while same-store sales are “expected to either be flat or down 1% from the prior year.”
Lowe’s Chairman, CEO and President Marvin Ellison had the following to say:
“We delivered better-than-expected results this quarter, with U.S. comps up 3%, driven by Pro growth of 19% and improved DIY sales trends […] Sales on Lowes.com grew 12%, on top of 25% growth last year. We also drove substantial improvement in adjusted operating margin through disciplined execution and cost management.”
LOW Stock Represents a Curious Contrast
Given both the encouraging print and better-than-expected consumer sentiment read, LOW stock is substantively swinging higher today. Nevertheless, the upbeat data does present somewhat of an oddity.
For one, Lowe’s Q3 report clashes with the comparatively pensive mood at rival Home Depot (NYSE:HD). According to Reuters, “Lowe’s optimism comes in contrast with comments from larger rival Home Depot Inc which on Tuesday left its annual forecasts unchanged despite beating quarterly estimates, citing caution over ‘mixed signals’ around demand.”
Another curious detail surrounds Lowe’s confidence in macroeconomic undercurrents. Ellison said the following:
“Consumer savings are near record highs, while disposable personal income remained strong […] [T]his is why we’re so confident (about the industry outlook) even in a period of high inflation and rising interest rates.”
On paper, this may sound appealing for LOW stock. However, the expressed belief clashes with high-level data. For instance, the U.S. Bureau of Economic Analysis reports that the personal saving rate dropped to 3.1% in September of this year, trending lower than pre-pandemic norms. In addition, another worrying factor for investors to consider is that Moody’s predicted a U.S. pandemic savings depletion earlier this year, per a Fortune article. Both of these points contradict optimism regarding sustained wealth of personal savings.
Ultimately, then, investors should exercise careful due diligence when it comes to LOW stock. Although Lowe’s managed a much-needed Q3 beat, one earnings report might not be a cure-all.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
