NEW YORK (TheStreet) -- In their considerable tumult, a sad counterpoint to Home Depot (HD), Lowe's (LOW) cut forecasts to ribbons, adding that guidance assumes additional $1.5 billion in share buybacks.
You got that? You should because it's pretty basic, even though too much of the media let it slip their minds.
Lowe's had a terrible second-quarter. Whatever should have been up was down and what should have been down was up. Worse still, they cut their full-year forecasts to $1.64 a share, from a range that stretched as high as $1.83. And? Their reduced performance goal is contingent upon achieving that certain level of buybacks.
It always requires a leap of faith to trust that a company will buy the load of shares they say they will. Actually, forget leap of faith. It's often tantamount to a leap off a bridge. Companies frequently don't buy back quite as much as promised. Sometimes, they're trying to trick you; other times, they lose confidence in their stock or cash is simply needed elsewhere. So how did the media do in alerting you to the fact that, amid all their troubles, Lowe's is relying on a promised level of buybacks, a shaky premise indeed? Seeking Alpha was fairly typical. It asked in a headline: "Should You Be Buying Lowe's After Earnings?" But nowhere does the answer (yes, it says) even consider the buyback, which even Lowe's identified as an essential variable. In an article headlined "Lowe's Turnaround Slows," The Wall Street Journal mentions the stock buyback goals directly after the full-year forecasts, as is absolutely necessary. But not always done. Look for it, to head a common cause of disappointment and confusion off at the pass. At the time of publication, the author held no positions in any of the stocks mentioned in this column. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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