Investing
Return to Article

Dykstra: Build Up Lowe's

Lenny Dykstra

06/27/07 - 11:15 AM EDT
Lowe's(LOW Quote - Cramer on LOW - Stock Picks), the world's second-largest home improvement retailer, recently reported quarterly earnings for the first quarter of 2007. As most investors expected, figures were less than stellar due to the soft housing market.

The company reported net earnings of $739 million for the quarter ended May 4, which represented a 12.1% decline vs. the same period a year ago. Net sales for the quarter increased 2.1% to $12.2 billion, up from $11.9 billion in the first quarter of 2006.

But, during the quarter, Lowe's, which is second only to Home Depot(HD Quote - Cramer on HD - Stock Picks), opened 15 new stores. Those openings brought the number of stores Lowe's operates to 1,400, representing 158.7 million square feet of retail selling space, which is an 11.2% increase over last year.

Lowe's has grown from a small hardware store in North Carolina to the second-largest home improvement retailer worldwide and the seventh-largest retailer in the U.S., operating in 49 states.

The Mooresville, N.C.-based company was founded in 1952 and has been helping customers with home improvement for more than 60 years.

However, let's look to the financial statements to discover why Lowe's makes an attractive pick.

Lowe's has reported annual revenue of $46.93 billion, and the stock offers a price-earnings (P/E) ratio of 13.47, and a return on equity of 20.69%, giving it a very strong financial base.

Additionally, on May 25, the company approved an increase in its current share-repurchase program of $3 billion through fiscal 2009, which increases shareholder value.

Today, I will place an order for 10 of the January 22.50 DITM calls (LOWAX) for $9, or better.