Raymond James Downgrades Lowe's To 'Outperform'

SAN FRANCISCO (AP) — A Raymond James analyst downgraded the shares of home improvement retailer Lowe's on Friday, saying it will be at a disadvantage to bigger rival Home Depot as it switches its growth strategy.

Analyst Budd Bugatch downgraded Lowe's to "Outperform" from "Strong Buy."

Bugatch said Lowe's Cos. is moving from a higher growth strategy "where it expends significant capital resources to a more mature strategy with more measured unit growth." He said this makes it more vulnerable to Home Depot over the next few quarters because of its geographical concentration and tougher prior-year comparisons.

Lowe's confirmed at a recent conference of analysts that it would expand its overall square footage growth by 2 percent to 2.5 percent over the next five years, Bugatch said, an announcement that would likely lead some value-oriented investors to pull back.

Bugatch also said Lowe's has less of a presence in states such as Florida, California and New York, where its rival Home Depot would get a boost as the economy and consumer confidence improves.

The analyst revised his 2009 profit estimate down by a penny to $1.18 per share from $1.19. He lowered his fiscal 2010 profit expectation to $1.32 from $1.34 but raised his 2011 profit expectation to $1.75 from $1.64 based on planned share buybacks.

Analysts polled by Thomson Reuters expect $1.20 per share in fiscal 2009 and $1.34 per share in fiscal 2010.

Shares of Mooresville, N.C.-based Lowe's fell 33 cents to $21.06 in midday trading.