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Check Out Lowe’s (LOW) Probability of Beating in Q1 Earnings


Lowe's Companies, Inc. LOW is scheduled to report first-quarter fiscal 2019 numbers on May 22, before the opening bell. We note that in the trailing four quarters, this home improvement retailer’s bottom line surpassed the Zacks Consensus Estimate by an average of 1.8%. Let’s see what’s in store for the company this time around.

How Are Estimates Faring?

The Zacks Consensus Estimate for the first quarter is pegged at $1.35, reflecting an increase of 13.5% from $1.19 per share reported in the year-ago quarter. However, the consensus mark has moved south by a penny in the past 30 days. For revenues, the consensus mark stands at $17,707 million, up about 2% from the year-ago quarter’s figure.

Lowe's Companies, Inc. Price, Consensus and EPS Surprise

Factors to Consider

Lowe's plan to augment sales, contain costs and improve cash flow generation from operations seems to be working in its favour. This is quite evident from the aforementioned consensus estimates for the top line and the bottom line that depicts year-over-year growth. The company’s pro-customer centric approach as well as robust marketing and merchandising efforts have been playing crucial roles.

Also, the company’s strong digital presence has been aiding its performance for a while. Incidentally, during the fourth quarter, the company achieved 11% comps growth on Lowes.com driven by robust traffic. Management’s focus on improving omni-channel capabilities, enhancing consumers’ digital shopping experience and inventory rationalizing, are likely to generate incremental sales.

Apart from these, in a bid to continue augmenting sales from pro customers, the company has been augmenting pro-focused brands. Lowe’s has refurbished its pro-service business website, LowesForPros.com, in order to give special attention to the needs of its Pro-customers. Together, these upsides paint an impressive picture about Lowe’s top line in the quarter to be reported.

However, Lowe’s plans to exit Orchard Supply Hardware business and Mexico retail operations along with shuttering certain non-core businesses in U.S. home improvements including Alacrity Renovation and Iris Smart Home. Although this decision is likely to enable the company to focus more on prospective areas such as home improvements, home furnishing products, repair and maintenance, it has led to higher pre-tax charges.

This, along with soft margins and headwinds related to intense competition remain matters of concern. Additionally, it anticipates softness in the Canadian housing market to persist in the near-term.

What Our Model Says

Our proven model does not conclusively show that Lowe's is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Though Lowe's has a Zacks Rank #3, its Earnings ESP of -5.19% makes surprise prediction difficult.

Stocks with Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.

The TJX Companies, Inc. TJX has an Earnings ESP of +0.79% and a Zacks Rank #2.

Target Corp. TGT has an Earnings ESP of +0.42% and a Zacks Rank #2.

Dollar General DG has an Earnings ESP of +1.51% and a Zacks Rank #3.

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