Today, various factors are pushing Lowe's stock downward.
Today, various factors are pushing Lowe's stock downward.
With a brief glance at the last quarter's key figures, Lowe's (LOW, -0.42%) shares ought to have seen a boost today. Surprisingly, sales and earnings surpassed forecasts. However, delve deeper, and you'll find that the retailer's revenue and earnings per share plummeted year over year. Plus, the company reported persistent declines in store sales, with no sign of recovery anytime soon. As a result, Lowe's stock plummeted 4% during mid-session on Tuesday.
Still sailing against the wind
Lowe's managed to make $2.89 in per-share operating profit from its $20.2 billion in sales in the last quarter, ending in early November. Despite surpassing the estimated $20 billion and $2.82 per share, both figures experienced a decline from the year-ago figures of $20.5 billion and $3.06 per share. Adding fuel to the bearish sentiments was a 1.1% decrease in same-store sales. This negative trend started showing up last year.
Leadership points out that numerous consumers are postponing home improvement projects, due to the impact of inflation and various logistical challenges (including the lingering effects of two major hurricanes).
There's no positive outlook on the horizon either. Although the home improvement retailer did revise its full-year same-store sales expectations, it still expects same-store sales to dip between 3% and 3.5% for the current fiscal year. The operating profit margins are expected to slip by 10 basis points and hover between 12.3% and 12.4%. Although analysts are predicting better numbers for next year, they're only expecting marginal improvements.
Not the opportune moment (or environment) to invest in Lowe's stock
Although Lowe's is currently grappling with a challenging period that might stretch into 2025, it's not on the brink of extinction. The nation's second-largest hardware store chain plays a crucial role in providing essential goods and services, and its demand will never fade away.
However, given the stock's elevated valuation, surpassing 20 times its past and projected earnings, the current headwinds make it an unfavorable choice compared to other options. For the time being, consider exploring other alternatives and wait for Lowe's home improvement business to regain its momentum. There's no room for anything less than ironclad strength while Lowe's stock is currently priced.
In light of Lowe's financial struggles, including declining revenues and earnings per share, a persistent drop in store sales, and a revised forecast for a 3% to 3.5% decrease in same-store sales for the current fiscal year, it might be prudent for investors to explore alternative investments instead of investing in Lowe's stock at its current valuation, which is significantly higher than its past and projected earnings.
Given the current challenges faced by Lowe's and the uncertain future outlook, it might not be the most financially sound decision to invest in the company's stock, especially considering the many other investment opportunities available in the market.