Lowe's reports Wednesday morning. Analysts are expecting fourth-quarter fiscal 2015 earnings per share of 59 cents on $13.068 billion in revenue. For the year, the company should post revenue of $58.9 billion, up 4.8%, and earn $3.30. Lowe's should end the year with same-store sales of 4.4%. Operating margins are estimated to increase between 80 and 100 basis points.
Overall, Lowe's should have a strong finish to the year.
Investors will be watching the forward guidance as Lowe's heads into its two most important quarters. For the first quarter, which will be reported in April, the consensus revenue estimate is $14.75 billion, up 4.4%. Lowe's is estimated to earn 86 cents.
As the housing market continues its recovery, same-store sales are projected to increase 4.7% and operating margin should expand about 90 basis points to 10.2%.
The company has an aggressive share repurchase program in place. In 2015, the company retired about 7% of its shares outstanding and will likely do the same next year. Fiscal 2016 earnings of $3.30 will rise 22% from fiscal 2015's $2.71. The buyback will help Lowe's add another 20% to earnings of $3.95 in the 2017 fiscal year.
In the last two years, both Lowe's andHome Depot (HD) - Get Report have easily outperformed the S&P 500 (SPY) - Get Report . I would expect them to do it again this year. Home Depot is up 57% and Lowe's is up 47%, while the S&P 500 has only risen about 5%. Share buybacks, square footage growth and stable same-store sales should keep both stocks climbing.
Lowe's should be able to reach the mid $80s by the end of the year. Historically, Lowe's trades between 16 and 26 times forward earnings. With a forward estimate of $3.95 and a middle-of-the-road multiple, it's pretty easy to see Lowe's trading to the mid $80s by the end of the year.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.