Lowe’s (LOW) slipped a little over 1% in Wednesday’s trading session after delivering disappointing Q3 earnings followed by a reduced guidance for the year ahead.
While the home improvement retailer did exceed the earnings expectation with $3.06/share compared to the $3.02/share consensus, a cinch in consumer spending is becoming more and more apparent.
The company reported a drop in same-store sales of 7.4%. The expectation was for a drop of 5.4%. This resulted in just $20.5 billion in sales, below the consensus of $20.9 billion.
CEO Marvin R. Ellison attributed this performance to a pullback in DIY discretionary spending – which accounts for as much as ¾ of the company’s total sales. However, Ellison says that he’s satisfied with the company’s operating performance and improved customer service.
Just a few months back in August, we talked about Lowe’s Q2 results which featured sales troubles as well. The company was already beginning to point towards a drop in demand for home improvement projects and DIY spending.
At the time, Lowe’s remained committed to its full-year outlook – but that changed with this quarter’s results. The company walked back its expectations for full-year sales which previously sat at $87 billion to $89 billion.
Now, total sales are expected to come in at just $86 billion. Management also lowered the full-year earnings from a range of $13.20 to $13.60 – the goal is just $13/share now.
Rival Home Depot reported favorable earnings just last week, which is certainly not helping LOW on the stock market right now. That being said, we’ve taken a deeper look through the VectorVest stock forecasting software and uncovered 3 reasons to take a bullish stance on LOW.
LOW Still Has Very Good Upside Potential, Safety, and Timing
VectorVest saves you time while empowering you to win more trades. This is made possible through a simple, proprietary stock rating system comprised of 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT).
Each rating sits on its own scale of 0.00-2.00 with 1.00 being the average, allowing for quick and easy interpretation. But, it gets even easier.
You’re given a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. As for LOW, here’s what you need to know:
- Very Good Upside Potential: The RV rating is a comparison of a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It offers much better insight than a simple comparison of price to value alone. LOW has a very good RV rating of 1.29. Further to that point, the stock is undervalued - with a current value of $271/share.
- Very Good Safety: The RS rating is an indicator of risk. It’s derived through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, price volatility, sales volume, and other factors. As for LOW, the RS rating of 1.32 is very good.
- Very Good Timing: Despite a slight slip in today’s price, LOW still has very good timing - with an RT rating of 1.38. The stock was rallying heading into today and still sits 9% higher in the past month. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 1.33 is very good, and it’s enough to earn LOW a BUY recommendation in the VectorVest system.
That being said, you should take a deeper look yourself and get a free stock analysis at VectorVest before you do anything else. You’re not going to want to miss this opportunity.
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VectorVest advocates buying safe, undervalued stocks, rising in price. LOW disappointed with dwindling sales for Q3 and a lowered guidance for the remainder of the year. However, the stock still has very good upside potential, safety, and timing.
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