Market Overview

UPDATE: ISI Group Upgrades Lowe's Companies to Buy on Multiple Positive Factors

Related LOW
Sympathy Companies In Play Following Lumber Liquidators, Tractor Supply Disappointments
Lumber Liquidators Slashes Outlook, Cites 'Significantly Lower' Traffic
M&A Activity Fearless Against Rate Hikes (Fox Business)

In a report published Wednesday, ISI Group analyst Greg Melich upgraded the rating on Lowe's Companies (NYSE: LOW) from Neutral to Buy, and raised the price target from $40.00 to $46.00.

In the report, Melich noted, “Margins can hit 10% vs 7%, if productivity grows 20% to $300/ft. It may take several years, but if the industry remains rational, margin expansion & buybacks should take earnings to $2.85 by 2014. ~50% of the market cap can come back to shareholders by 2016. Sales normalization and capex cuts should allow LOW to return $21B in capital (3/4 buyback, 1/4 dividend) between 2013-2016. Versus HD, the market doesn't appear to have the same level of conviction on management's longer-term intentions on this front. Recent indications of finding discipline on capex, store growth and inventory. Bottom Line: LOW is a solid name in a rational, high return space. LOW and HD remained rational through the bust, with gross margins stable and RNOA held above 7% for both. There is a lot of leverage in both, but LOW will likely lag HD in the near term as HD benefits from better traffic trends.”

Lowe's Companies closed on Tuesday at $40.29.

Posted-In: ISI GroupAnalyst Color Upgrades Analyst Ratings

 

Most Popular

Related Articles (LOW)

Around the Web, We're Loving...

Partner Network

Get Benzinga's News Delivered Free