Rivals Home Depot Inc. (NYSE: HD) and Lowe’s Companies Inc. (NYSE: LOW) both reported their fiscal second-quarter financial results this past week. Results from Home Depot were more or less in line with estimates, while Lowe’s lagged behind.
Whether each earnings report was a win, the investor response was muted, if not down, for the week as a whole for both stocks. This quarter is generally supposed to be the strongest one for these two home improvement giants, and seemingly each just passed on the quarter. Analysts took a closer look at the companies after earnings were reported.
24/7 Wall St. has included some highlights from each of the earnings reports as well as what analysts are saying after the fact.
Home Depot said that it had $1.97 in earnings per share (EPS) on $26.5 billion in revenue. The consensus estimates from Thomson Reuters had called for $1.97 in EPS on revenue of $26.48 billion. Home Depot posted EPS of $1.73 and $24.83 billion in revenue in the same period of last year.
Comparable store sales for the most recent quarter were up 4.7%, and comp sales for U.S. stores were positive 5.4%.
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Home Depot reaffirmed its fiscal 2016 sales guidance and expects sales will rise by roughly 6.3% and comp sales will be up about 4.9%. However, on the bottom line, the company raised its diluted EPS guidance for the year and now expects diluted EPS to grow by 15.6% from fiscal 2015 to $6.31. The consensus estimates call for $6.31 in EPS on $94.3 billion in revenue for the fiscal year.
After earnings were reported, a few analysts weighed in on Home Depot:
- Argus has a Buy rating and raised its price target to $154 from $150.
- Citigroup has a Buy rating and raised its price target to $155 from $152.
- Deutsche Bank has a Buy rating and raised its price target to $145 from $143.
- JPMorgan reiterated a Buy rating with a $142 price target.
- Nomura reiterated a Buy rating with a $155 price target.
- Royal Bank of Canada has an Outperform rating and raised its price target to $155 from $150.
- Wedbush upgraded to an Outperform rating from Neutral and raised its price target to $145 from $140.
Lowe’s posted diluted EPS of $1.31 and $18.26 billion in revenues. In the same period a year ago, Lowe’s reported EPS of $1.20 on revenue of $17.3 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $1.42 and $18.45 billion in revenue.
Same-store sales increased 2% in the quarter and rose 1.9% for U.S. stores. Net income rose 3.7% in the quarter to $1.2 billion.
In its guidance, the company pegged full-year 2016 sales to rise about 10% year over year, including an extra week compared with last year. Same-store sales are expected to increase 4%. Diluted earnings per share are forecast at around $4.06, down from a prior forecast of about $4.11. The consensus analysts’ estimate for EPS is currently $4.06 and the revenue estimate is $63.84 billion.
The update to Lowe’s guidance reflects the impact of the acquisition of RONA stores that was completed in May.
Compared to Home Depot’s results and increase in full-year earnings guidance, the earnings and revenue misses initially hammered the shares Wednesday morning. The results were doubly disappointing because the outlook for home improvement has been very strong.
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Analysts had this to say about Lowe’s:
- Argus reiterated a Buy rating with a $90 price target.
- Jefferies reiterated a Hold rating with an $81 price target.
- JPMorgan reiterated a Buy rating with an $89 price target.
- Morgan Stanley has a Buy rating with an $87 price target.
- Nomura has a Hold rating with an $80 price target.
Shares of Home Depot closed trading at $135.46 on Friday, with a consensus analyst price target of $150.29 and a 52-week trading range of $92.17 to $139.00.
Lowe’s shares ended the week at $77.82. The consensus price target is $87.48, and a 52-week range is $62.62 to $83.65.
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