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%.
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.
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.