Lowe's Posts Earnings Beat but Issues Light Profit Forecast

Home-improvement giant Lowe's posts fiscal fourth-quarter earnings that beat analysts' forecasts even as same-store sales drop.
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Home-improvement giant Lowe's  (LOW) - Get Report on Wednesday posted fourth-quarter earnings that beat analysts' forecasts amid ongoing cost-cutting measures and improved foot traffic at its big-box brick-and-mortar stores, even as same-store sales dropped.

Lowe's said it swung to a net profit of $509 million, or 66 cents a share, vs. a loss of $824 million, or $1.03 a share, in the comparable year-ago quarter. Excluding the impact of one-time charges, per-share earnings increased 17.5% to 94 cents from 80 cents in the fourth quarter of 2018, 3 cents ahead of FactSet's average analyst estimate of 91 cents a share.

Sales came in at $16 billion, above the $15.6 billion posted a year ago though below the $16.2 billion expected by analysts. Same-store sales - a key metric of retail activity - were 2.5% vs. 3.2% a year ago.

"Our sales growth was driven almost entirely by our brick and mortar stores, supported by our investments in technology, store environment and the 'Pro' business," CEO Marvin Ellison said in a statement, adding that the company has "a detailed road map" in place to modernize its Lowes.com e-commerce platform.

Analysts were generally positive on the numbers amid what they see as an improving longer-term backdrop for home-improvement and building-focused retailers, even as weaker same-store sales and an ongoing lack of online presence impacted Lowe's. 

"We remain very optimistic for the potential for trends at LOW to strengthen steadily, as internal initiatives take hold against an improving sector backdrop." analysts at Oppenheimer wrote in a research note. 

The results followed in the footsteps of competitor Home Depot  (HD) - Get Report, which posted stronger-than-expected fourth-quarter earnings on Tuesday and reiterated its full-year sales forecast as same-store sales for the holiday period topped forecasts.

Home Depot said earnings for the three months ended Feb. 3 were $2.28 a share, up modestly from a year ago but a full 18 cents ahead of Wall Street consensus forecasts.

While Lowe's results were generally taken as positive, longer term risks to both Lowe's and Home Depot remain, including a steeper-than-expected moderation in housing market growth, a drop in consumer spending and potentially adverse weather, wrote Wedbush Securities analysts Seth Basham and Nathan Friedman in a research note.

For fiscal 2021, Lowe's said it expects adjusted per-share earnings of between $6.45 and $6.65 on sales growth of approximately 2.5% to 3% and same-store sales growth of approximately 3% to 3.5%. Analysts were expecting fiscal-year earnings of $6.67 a share.

Lowe's said it expects operating income growth of around 12% to 16% in fiscal 2021.

Shares of Lowe's were up 0.4% at $118.99 in morning trading on Wednesday. Shares of Home Depot were down 0,.45% at $236.30.