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HP, Lowe's and Home Depot Report Next Week: Will the Rally Continue?

LOW ChartLOW data by YCharts

Lowe's (LOW)

Lowe's is a retailer of home improvement products in the world, with specific emphasis on retail do-it-yourself and commercial business customers.

52-Week Range: $25.97 to $46.25

Price To Book: 3.7

The upcoming second-quarter earnings are highly anticipated by hopeful investors expecting an earnings growth report before the market opens on Wednesday.

The analysts' consensus profit appraisal is presently 79 cents a share, an eye-popping gain of 14 cents (17.7%) from 65 cents during the corresponding quarter last year. Analysts' estimates this quarter range from 75 cents, to a high of 83 cents per share. I expect Lowe's to beat by 2 cents or more. Most of the "whisper" numbers I have looked at are 79 cents or 80 cents, putting my 81 cents a little bit over the ledge.

It's hard for me to get an authentic feel of Lowe's from an anecdotal perspective. I live in Eau Claire, Wis., home office of Menards and the chain's owner John Menard. Two well-placed Menards' stores have successfully kept Home Depot and Lowe's out of my shopping area.

From a year ago, Lowe's shares have rocketed 70% higher after making an inviting buyer's dip last July. Buying at this level feels a little too close to chasing, but a move near $42 should be viewed as an entry opportunity.

Interest rates are climbing but, by historical standards, remain incredibly low. Investors should expect housing to continue growing and with housing comes home improvement. In short, I don't think Lowe's run is over, but the volatility is high enough that if you wait for a retracement, you're likely to get it.

One fly in the soup could come from the Affordable Care Act, aka Obamacare. The mandatory insurance requirements will remove money from every space except health care. So we know it will have a negative impact, but what we don't know is how powerful of an impact.

The rules and implementation are so fluid, and without direction that my three year old son with a crayon can chart the impact as well as anyone. For now, I think the bark is worse than the bite, but you shouldn't count on anywhere near the same run Lowe's enjoyed last year, for the next year.

Analysts are calling for a price target of $46.05, and if Lowe's delivers the goods during the earnings release, expect analysts to race each other in raising it. Lowe's does pay a relatively small 72 cents in dividends for a yield of 1.6%.

Not a reason to buy, but a likeable bonus if you're ready to acquire shares anyway. Lowe's has raised the dividend about once a year over the past six years, so another increase should be expected soon. Forget about short sellers targeting home improvement, the short interest is only 1.7%. That's low enough to consider it a bullish indication.

LOW Revenue Quarterly ChartLOW Revenue Quarterly data by YCharts

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