Lowe's Long-Term Goals To Become Less Aggressive

Wedbush expects Lowe's Companies, Inc. LOW to grow EPS in mid-teens over the next three years and expect guidance in line with this view at its analyst day on Wednesday.

The event comes amid signs of moderating industry demand growth, higher promotions, and setbacks in the last two quarters that led the company to track below the 2017 guidance provided at its last analyst meeting.

“In addition to new financial guidance for 2019 and an updated macro view from the company, we will be focused on initiatives in Pro, omnichannel and marketing to drive sales productivity after a widening gap with HD recently,” analyst Seth Basham wrote in a note.

Basham said Lowe's is unlikely to meet its targets of about 4 percent in annual comps (4.5-5.0 percent annual sales growth), and 21 percent CAGR adjusted EPS growth to about $4.70 (vs. Wedbush’s $4.52 estimate and consensus $4.55).

Besham sees 2019 guidance of about 3 percent annual comps, 40 bps annual EBIT margin expansion and midteens annual EPS growth to about $5.80.

“While we believe the housing cycle still has legs, the best is likely behind us,” Besham continued.

“At the same time, LOW’s operational and merchandising momentum may have slowed, making it challenging to close the comp gap HD, which we believe is key for relative share price outperformance,” Besham added.

Shares of Lowe’s closed Friday’s trading at $72.31. Basham has a Neutral rating with price target of $73.

Image: Mike Mozart, Flickr