Bank of America Reiterates Buy Rating on Lowe's Following Orchard Supply Purchase

In a report published Monday, Bank of America analyst Denise Chai reiterated a Buy rating and $50.00 price target on Lowe's LOW.

In the report, Bank of America noted, “LOW has agreed to acquire at least 60 stores in CA from Sears' spin-off, Orchard Supply Hardware (OSH, Not Rated) for $205mn plus the assumption of payables to nearly all vendors. OSH's $657mn in FY12 revenue represents just over 1% of LOW's revenue, and therefore we view this acquisition as fairly immaterial. However, we are positive on the increased exposure OSH brings to the recovering California housing market. California represents 6.4% of LOW's revenue (110 stores) vs 11.7% for HD (232 stores). We estimate this acquisition will be slightly accretive to EPS, which are now as follows: 2013 unchanged; 2014 is $2.59 (from $2.58); 2015 is $3.17 (from $3.15).”

Lowe's closed on Friday at $41.16.